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 email@example.com.
Carl Doerksen is the Director of Corporate Development at Generational Equity, part of the Generational Group.
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.