One of the most important buyer groups for business owners to consider approaching when marketing their companies is private equity (PE) firms. Quite often when we poll attendees at our exit planning conferences, PE firms are way down on the list of potential buyers. Since most visitors at our meetings are there to learn all about the M&A process and active buyers, it makes sense that this key group of buyers is largely unknown at the outset of our conferences.
Yet according to recent data from PitchBook, the private equity market is a key segment of potential buyers that business owners need to be aware of:
A couple of key takeaways from this PitchBook analysis are important. First, clearly private equity firms in the middle market are quite active (the definition of the middle market is elusive and varies from source to source – for our purposes we define it as deals valued below $150 million). We have seen a gradual increase in PE interest in our deals too, growing since the end of the recession to peak levels this year. In fact, based on deal activity thus far, we anticipate that 2017 will be another record year for Generational Equity and PE buyers.
Secondly, a number of factors are converging to create this current “seller’s market” not only for PE but for all buyers. Dry powder, as mentioned above, refers to the level of committed capital on the sidelines with equity firms waiting to be invested. As you can imagine, this has grown dramatically over the past five years as more and more investors are hoping to earn the tremendous returns available in funds that invest in privately held companies.
On top of this, although not mentioned in the PitchBook analysis, is the reality that interest rates, despite recent increases, remain at record low levels when compared to historic norms. Since a significant portion of all deals, but especially deals relating to private equity firms involve some component of financing, the fact that interest rates are still low is a compelling driver of deal demand.
Finally, from a private equity standpoint, the only real dampening factor impacting this market is the simple fact that there are not enough quality deals for them to look at to make acquisition plans. Now the term “quality” can connote many different things from PE firm to PE firm. For some, quality deals mean business targets that meet minimum revenue/earnings thresholds. Others have growth criteria, and many have industry-specific benchmarks that must be met. But no matter which definition of terms you use, there simply are not enough businesses in the market presently for equity firms to analyze for investment purposes.
Keep in mind that in order to narrow their options down to 2-3 viable targets annually, many equity firms will review hundreds (in some cases thousands) of companies before they make any indications of interest. Ultimately what this means to business owners is that they are quite literally missing out on potential opportunities to sell their company for the maximum value, opportunities that may not be available again in quite some time.
If private equity activity is news to you and you would like to learn more, you should set aside some time to attend a Generational Equity exit planning conference. While there you will not only learn about PE firms as buyers, you will be introduced to a full selection of buyers that are active and how you can determine which set of buyers is optimal for you and your firm.
To find out when we will be in your area next, please reach out to us at 972-232-1121 or use our website to provide us with your contact information and we will be in touch.
Bottom line: When you do eventually reach a decision to exit your firm, do so in a planned, thoughtful way and be sure to be aware of all potential buyer types that are active in the current seller’s market.
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2017 Generational Equity, LLC. All Rights Reserved.
The information we learn from customers helps us personalize and continually improve your experience. Here are the types of information we gather.
We receive and store any information you enter on our Web site or give us in any other way. We do not sell or rent your personal information to others without your consent. We use the information we collect only for the purposes sending promotional information, enhancing the operation of our site, serving advertisements, for statistical purposes and to administer our systems. We DO NOT use third parties to provide customer service, to serve site content, to serve the advertisements you see on our site, to conduct surveys, to help administer promotional emails, or to administer drawings or contests, but reserve the right to do so in the future without advance notice.
By submitting my name electronically and clicking the “submit” button, I understand that I am providing Generational Group, Inc., Generational Equity, LLC, Generational Capital Markets, LLC, DealForce LLC, their affiliates, representatives, contractors, etc. (“Generational Group”) my telephone number, which may include a number that is wireless and/or a number that is on a national, state, or other Do Not Call registry or list. I hereby consent and agree to receive telephone calls including any autodialed and/or pre-recorded telemarketing calls and/or text messages (telemarketing) from or on behalf of Generational Group at the telephone number provided. I further consent and agree that telephone calls may be made using automated technology such as an automatic telephone dialing system, artificial or prerecorded voice, or SMS text messaging. Consent is not a condition of purchase. I further warrant and represent that any telephone number provided is not on any state or national Do Not Call Registry and that by agreeing to these terms and conditions that if any number provided is on any such registry, I hereby consent and agree to receive telemarking calls and/or communications including any phone calls, text messages, URLs, links, emails, etc. to the telephone number(s) and/or any e-mail addresses provided. I understand that by entering my name in the electronic form provided, that I am signing my name as equally as if it was my handwritten signature and that it is my intent to provide an “electronic signature” as that term is defined in state and federal law, as well as industry practices for e-commerce.
For reasons such as improving personalization of our service, we might receive information about you from other sources and add it to our account information.
Generational Group may license the use of its intellectual property including but not limited to its name, likeness, and logo for the use of affiliated offices. Such affiliated offices may not be owned, controlled, managed, supervised or staffed by employees, officers, or agents of Generational Group. Affiliated offices may be independently owned and operated. For more information about a particular office, please contact Generational Group at its office in Dallas, Texas.
This page may contain other proprietary notices and copyright information, the terms of which must be observed and followed.
Information on this web site may contain technical inaccuracies or typographical errors. Information may be changed or updated without notice. Generational Group may also make improvements and/or changes in the products and/or the programs described in this information at any time without notice.
Generational Group does not want to receive confidential or proprietary information from you through our web site. Please note that any information or material sent to Generational Group will be deemed NOT to be confidential. By sending Generational Group any information or material, you grant Generational Group an unrestricted, irrevocable license to use, reproduce, display, perform, modify, transmit and distribute those materials or information, and you also agree that Generational Group is free to use any ideas, concepts, know-how or techniques that you send us for any purpose.
Our computer system protects personal information using advanced firewall technology.
Information Generational Group publishes on the World Wide Web may contain references or cross references to other products, programs and services that are not announced or available in your country. Such references do not imply that Generational Group intends to announce such products, programs or services in your country. Consult a Generational Group representative for information regarding the products, programs and services which may be available to you.
Generational Group makes no representations whatsoever about any other web site which you may access through this one. When you access a non-Generational Group web site, please understand that it is independent from Generational Group, and that Generational Group has no control over the content on that web site. In addition, a link to a non-Generational Group web site does not mean that Generational Group endorses or accepts any responsibility for the content, or the use, of such web site. It is up to you to take precautions to ensure that whatever you select for your use is free of such items as viruses, worms, Trojan horses and other items of a destructive nature.
IN NO EVENT WILL Generational Group BE LIABLE TO ANY PARTY OR ANY DIRECT, INDIRECT, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES FOR ANY USE OF THIS WEBSITE, OR ON ANY OTHER HYPERLINKED WEBSITE, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS, BUSINESS INTERRUPTION, LOSS OF PROGRAMS OR OTHER DATA ON YOUR INFORMATION HANDLING SYSTEM OR OTHERWISE, EVEN IF WE ARE EXPRESSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Furthermore, all information contained within this website is the property of Generational Group.