Private equity investors have plenty of money on hand to invest. According to a recent Bloomberg report, they are sitting on a record nearly USD1 trillion in what is called “dry powder,” money raised but not yet invested. What they don’t have is surplus time to deal with firms that are not serious and prepared for the sales process.
Many private equity firms are interested in investing in privately owned firms in the lower middle market. In fact, according to a recent survey by PitchBook, close to USD119 billion was invested by private equity firms in the first quarter of 2017 alone.
“Nearly 50 per cent of those deals were valued below USD25 million; evidence of the interest private equity has in lower middle-market businesses,” says Terry Johnson, Chief Revenue and Strategy Officer at Generational Equity. “But getting and keeping their attention requires more than placing a for sale sign on your business. First of all, you have to have a relationship with them and then be able to speak their language in all your documentation.”
“The confidential information memorandum that Generational Equity puts together is a great accelerator of the process,” says James Shorin of Horizon Holdings, whose firm has invested in Generational Equity clients. “It is a great way to get up to speed very quickly on the business and key areas that we’re going to be looking at.”
The issue of time is critical to PE firms. “The private equity industry is sort of a strange industry in the sense that our scarce resource is not capital, it is actually time,” says Michael Pfeffer, Managing Director with Post Capital Partners in New York.
“Our clients receive a range of tailored services designed to attract the best and largest pool of potential buyers. We provide the precise detailed financial information and other data sophisticated buyers require to close a deal,” says Johnson. “Through our comprehensive exit planning process, we help clients understand and unlock the potential value of their business – applying Wall Street methodologies private equity groups require.”
While entrepreneurs are successful business owners, most will have little or no experience selling their businesses. Private equity investors know they have a better chance of closing a deal in a reasonable timeframe if experienced professionals are guiding business owners during the process.
“I assume you would not engage [Generational Equity] unless you felt it was going to go to the end line,” says Shorin. “And it is a big help to us to have that. That is a confidence booster in the process.”
“Having Generational Equity as the mediator in this whole process was in my mind – kind of the glue. It’s what held this deal together,” says Anthony Haines, whose company acquired a business represented by Generational Equity. “Absolutely, I would buy another company from Generational Equity.”
“One of the major benefits we provide is getting our clients in front of buyers that they wouldn’t normally have access to, and PE firms are a perfect example of this,” said Johnson. He added, “Any business owner interested in learning more about how private equity buyers operate and how deals are structured should attend a Generational Equity exit planning conference. We hold these highly educational, complimentary meetings throughout North America to equip business owners with vital information about exit strategies.”