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 877-213-1792 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.
© 2016 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.