The title of the press release caught my attention: Pfingsten Invests in Oliver Printing Co. - First Platform Investment for $382 Million Fund V.
Upon further research, it turns out that Pfingsten, a private equity firm focusing on middle-market companies, has partnered with a printing/packaging industry veteran, a fellow by the name of Brian Dunsirn, to aggressively create a new packaging entity starting with this platform acquisition.
I used several M&A buzz words in the preceding paragraph so let me define them so we are all clear on the meaning of:
In a nutshell, a platform company is usually the initial investment into an industry that a private equity (PE) firm makes with the stated objective of then adding on to the platform via the acquisition of numerous smaller firms that are synergistic to the platform’s operations. This is essentially what Pfingsten and Mr. Dunsirn plan on doing via the acquisition of Oliver based on the release:
“Pfingsten and Dunsirn established a partnership in 2014 to seek and acquire businesses in the packaging industry.”
This is a common method of operation for PE firms like Pfingsten that specialize in investing in the middle market, which leads us to our second definition. The middle market is generally defined as companies valued below $500 million and even more specifically, the lower middle-market are those valued below $100 million.
According to the Pfingsten website, they focus on making investments in manufacturing, distribution, and business service operations with valuations between $15 to $100 million, revenue from $20 to $150 million, and/or EBITDA of $3-$12 million (EBITDA = earnings before interest, taxes, depreciation and amortization). Although this is not stated, I bet that these numbers are primarily for platform acquisitions; subsequent “add-ons” could be much smaller. Indeed, one of their stated transaction types are “strategic add-on acquisitions for platform companies.”
Now the reason I bring this transaction up is that it is simply one example of an equity firm operating in the lower middle-market, making very targeted and well thought out acquisitions to compliment an initial investment in an industry. There are dozens and dozens of firms doing the same in a myriad of industry segments. Odds are really good that there are a few doing the same in your industry and you are not even aware of it.
But we are. Our buyer database contains over 34,000 registered organizations/entities that have told us specifically what types of businesses they are interested in acquiring or investing in. We use this information to create targeted buyer lists that help us to attract the attention of professional buyers.
And one under-publicized benefit of partnering with a lower-middle-market-focused PE firm like Pfingsten is that not only do they provide an initial capital investment in their targets, they also provide post-acquisition support in the form of professional management, financial acumen, operational expertise, and sales/marketing experience. This is how Pfingsten specifically describes what they do post acquisition:
“Pfingsten is an operationally-driven private equity firm focused on long-term value creation. We help businesses in ways few private equity firms can, applying our unique operational and global resources to offer real solutions to our companies, unlocking value and propelling growth.
We invest a minimum of 50% equity into the capital structure of each portfolio company, providing the flexibility to create value through operational improvements, professional management practices, global capabilities and profitable business growth, versus financial engineering. Our operating professionals, who comprise nearly half our team, work in partnership with company management, and our global capability opens doors in markets around the globe.”
I have taken the liberty of highlighting part of a key sentence in the paragraph above. The term “financial engineering” refers to the practice of using accounting methods to make an investment financially look better often without really providing any operational improvements. It is what has often given PE firms historically a bad name among business owners. This is unfortunate because far more firms, especially those that focus on the lower middle-market, provide services that often dramatically improve the post-acquisition operations of the entity.
If you are still skeptical about this, I recommend that you do further research on the American Investment Council’s website and specifically look at the following:
In addition, listen to what a few of our clients have to say about partnering with a PE firm:
Bottom line: If you are the owner of a privately held company and are looking for a partner to fund your growth, be sure to put PE firms on your buyer list. Your company may not be large enough to be a platform acquisition, but it might be possible to be “added on” to a synergistic portfolio holding.
To learn more about how this process works, please call us at 972-232-1121 and ask to speak with one of our senior business advisors. We would be glad to meet with you at one of our M&A seminars to discuss your specific situation.
Carl Doerksen is the Director of Corporate Development at Generational Equity.
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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.
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
We were represented by Michael Goss with Generational. The due diligence was grueling and exhausting, but Michael propped us up and kept us motivated throughout the process. Debi and I continued to ask each other how we could possibly make it through this process without the assistance of Michael. Michael's professionalism and knowledge is absolutely amazing, and we are so blessed to have had him by our side as we made our future dreams come true.Bob and Debi Lee, Owners of BL Technology, Inc and BL Tl Services, LLC
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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 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
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.Betty L. Brennan, President, Taylor Studios
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.
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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.
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
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
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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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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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.
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T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.Bryan D. Horn, Owner, Over Under Clothing
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
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
Thanks to you, the entire GE team and especially Michael Goss for driving a great valuation, coaching me and driving the process across the finish line. Please let me know if there is anything I can do to support GE going forward. P.S. Given my experience with GE I felt comfortable enough to sign up with Generation Wealth Advisors!Tom Currier, Former President & CEO, Rackmount Solutions
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
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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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