Recently Mergers & Acquisitions magazine met with Mike Taylor of Midwest Growth Partners (MGP) to discuss current market conditions. The gist of the interview drilled into current trends not just in M&A in general but specifically in the lower middle market (LMM), which is usually defined as deals valued below $100 million.
MGP is a “$41 million private equity fund seeking investment opportunities in growth-oriented companies located in upper Midwest communities.” Mike Taylor is a managing partner with the firm and has extensive experience in lower middle-market acquisitions.
And in his view, the time is right for family firms to sell.
Even though the demand for larger deals has slowed slightly this year, according to Taylor, the factors driving family business sales are far different. He sees the current environment ripe for sellers, as buyers in this niche are very active. And more and more family-owned firms are realizing that since their owners are aging, a planned, well thought-out succession plan is needed. That is where private equity firms (PE) like MGP play a key role.
This is how MGP describes its focus:
Midwest Growth Partners acquires and invests in companies across the upper Midwest. They focus on manufacturing, food & agriculture, distribution & logistics and business service companies but will opportunistically look at other industries.
As a lower middle market fund, MGP makes individual equity investments ranging in size from $500,000 to $5,000,000 depending on the structure of the transaction and nature of the investment.
Investments could represent an outright acquisition, majority growth capital, minority growth capital, partial or full management team buyouts or an internal recapitalization.
One of the insightful questions that the reporter from Mergers & Acquisitions asked Mr. Taylor was this: How does a family-run business choose an equity partner? Taylor had some great input.
First, he indicates that they should be mindful of their priorities. If getting the maximum value for the business is the primary goal, then an equity firm is probably not the best option in general. PE firms typically have strict guidelines for the internal rate of return that they have to generate via their investments; meaning that usually other buyers like strategics will pay a higher multiple.
However, if you are more concerned about the family’s business legacy, employees, reputation, and community, then partnering with an equity firm could be a great option because most make a significant commitment of time, capital, and personnel in their holdings. As we have seen, this can have a tremendous impact on the growth of a company invested in.
Our experience with family-owned businesses has taught us one key thing: Most are woefully underprepared for any type of exit event, and this can be devastating to the family’s financial legacy if something occurs that forces the firm to experience a succession to either another family member or an outside individual(s). I am, of course, referring once again to one of the Big D’s:
We have met with spouses, for example, at our exit planning conferences who share just how difficult it was to take over the daily management of the family business due to the sudden and tragic death of the founder. This is especially traumatic for the family if the surviving spouse was not involved in the business before.
The good news is that with some planning and effort you can not only avoid this scenario but also plan an exit that maximizes your financial return. If you are like most business owners and you have no exit plans in place, you should attend a Generational Equity M&A seminar. We hold these regularly throughout North America and they are designed to provide you with enough information to initiate your personal exit strategy.
To learn more about our conferences, please call me at 972-232-1125 or email me at firstname.lastname@example.org.
Carl Doerksen is the Director of Corporate Development at Generational Equity, part of the Generational Group.
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.Robert Evans, President and CEO of Mealtracker Dietary Software
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.
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.Pete L.
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.Robert Evans, President and CEO of Mealtracker Dietary Software
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
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.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.Karen S. Williams, CFO, BW Manufacturing
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
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
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!Andy Graham, Vice President, Modern Heating & Plumbing
We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.Michael J Polarek, President, Paragon Packaging
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.Michael J Polarek, President, Paragon Packaging
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.Jay Dinnison, Owner of Sharpe Mixers
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
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
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 would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”Karen S. Williams, CFO, BW Manufacturing
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
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