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Private Equity, Dry Powder, & Why It Matters to You!

By Generational Equity

Private Equity Dry Powder

Private equity firms have a record amount of cash to deploy in 2020. In fact, according to Fox Business News, they have an estimated $1.5T, an all-time high!

Fox adds:

As for private-equity firms themselves, their cash balances have risen every year since 2013 after falling the four years prior, in the wake of the global financial crisis. Still, how they generate more by moving out of previous investments will be a focus for investors and analysts.

Two items to consider here: First, far too few business owners that we meet with have PE firms in mind as potential buyers. They mistakenly think that they are too small or are in undesirable industries for PE firms to even consider. Our Insights over the years have debunked those myths:

Now if you take the time to review these articles, you will see a very common theme:

  • “Sterling is focused on making majority investments in manufacturing, distribution and industrial service businesses and is interested in exploring partnerships of all sizes.” (Article one)
  • “And it is great news for owners of lower middle market businesses because most PE firms in this niche have very low (if any) size criteria for add-ons.” (Article two)

Point number two: PE firms exist for one purpose – to invest the money their limited partners give them into companies and then help those companies grow via strategic guidance, organic growth and add-on acquisitions. Over time, either through taking the new entity public, or transitioning it to a strategic buyer (or another financial one), they generate returns for their investors.

So you see THEY HAVE TO INVEST THEIR DRY POWDER OR RETURN IT!

None of them wants a reputation for doing that, so the great news for you as a business owner is that the $1.5T must be invested in the next five years or so, which is the typical lifetime of a fund. And PE firms that specialize in the middle market are looking hard and aggressively for add-on opportunities.

The good news is that Generational Equity is here to help you prepare your business for sale, find an optimal buyer, negotiate and close the deal for you, as well as provide wealth management advice post-transaction.

To learn more about how we can help you take advantage of the $1.5T in dry powder currently with equity firms and move onto the next phase of your life, give us a call at 972-232-1121, or visit our website, provide us with your contact information, and we will be in touch.

Carl Doerksen is the Director of Corporate Development at Generational Equity.

© 2021 Generational Equity, LLC All Rights Reserved 

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The most important contribution I think Ahmad made was with his personality and work ethic. He is sincere, efficient, and very hard working. He was available to me at all times, whether it was for specific detail of the negotiation or just to talk through the bigger picture. He listened, advised, and recommended, but never forced his idea or opinions. In the time we worked together, he became a valued colleague and also a friend.
Salvo Stoch, Founder and CEO of Sleeping Partners
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Ralph Noblin, President of Noblin & Associates
The professionals at Generational Equity then helped develop a roadmap for enhancing the value of the firm and an evaluation report. This was completed by June 14, 2021. We then developed the Confidential Information Memorandum and put Taylor Studios, Inc. on the market by July.
Generational Equity’s professional staff helped me every step of the way. Their network and professionals are the only reason I sold my company this quickly. For me this is a once in a lifetime sale and I was unfamiliar with the process. I was able to lean on them with questions and concerns.
Betty L. Brennan, President, Taylor Studios
After attending a conference with GE, I decided that the value they bring would be worth the expense and as soon as I started working with them, I realized that was the right decision. When we started to get LOIs, Fred Zweifel took the lead on the communication and supported negotiations throughout the process, which got tricky as we moved forward. I learned that it can be common for companies to make a great offer then work to erode that price with their discoveries, but Fred and the GE team kept that from happening.
Caroline Connelly, CEO, OptoTest
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.
Andy Graham, Vice President, Modern Heating & Plumbing
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Bil MacLeslie, CEO, ipHouse
I wanted to take this opportunity to thank you for all that you have done for us. Not only did you take care of all the aspects of the sale but took extra care to make sure we knew what it looked like every step of the way. I will definitely recommend your company to anyone that is in a position to or looking to exit their business.
Shane and Johanna Kline, Owners of Vision Upfitters
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Bryan D. Horn, Owner, Over Under Clothing
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.
Terry D. Wickman, President, Keytroller
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Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
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Jay Dinnison, Owner of Sharpe Mixers
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Terry D. Wickman, President, Keytroller
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Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
Through the sale process, Generational brought in several interested buyers and we closed in about 6 months. I am so glad I accepted that invitation to the conference and could not be happier with the whole process. The team at Generational coupled with their knowledge and guidance was so valuable that in the end, I know I could never have done this on my own!
JoAnn Ellis, Owner of Fondren 5 Star Kennels
We had the pleasure of working with Mr. Ahmad Behjati Managing Director, M&A, for Generational Equity during our acquisition of Papa's Dodge in late 2021. Generational Equity and Mr. Behjati represented and marketed Papa’s Dodge. As our primary contact, Mr. Behjati was professional in every facet of this acquisition process, conveying valuable advice most times and assisting us in every step of the process.
Rick Greene of Dobbs Equity Partners LLC
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Robert Evans, President and CEO of Mealtracker Dietary Software
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Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
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Bil MacLeslie, CEO, ipHouse
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Larry Moore, Owner, A Company Portable Restrooms
Generational Equity’s assistance was invaluable in compiling and marketing our business.
Bil MacLeslie, CEO, ipHouse
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.
Larry Moore, Owner, A Company Portable Restrooms
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!
Eric Erlandson, Owner, Action Fastenings, Inc.
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Tom Currier, Former President & CEO, Rackmount Solutions
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Pete L.
I decided to attend the conference and hopefully receive some guidance on how to structure an exit plan of my business. Upon arriving at the conference, I was so impressed with the presentation given by Generational Equity that I set a future appointment that week to discuss the possibility of selling my business with their Senior Managing Director David Robinson.
JoAnn Ellis, Owner of Fondren 5 Star Kennels
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.
Jay Dinnison, Owner of Sharpe Mixers
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Bob and Debi Lee, Owners of BL Technology, Inc and BL Tl Services, LLC