There is a common question we receive quite often at our exit planning conferences from business owners: Does private equity invest in companies like mine?
They ask this when our conference leaders share real stories about the various types of deals buyers of middle market businesses make, including private equity firms. The answer? Several hundred PE firms in the U.S. alone focus solely on smaller acquisitions.
In fact, according to PitchBook, this year is shaping up to be a record year for PE activity in the middle market:
There are many themes in the US PE middle market worth discussing, but one trend we can't ignore is its consistent strength over the years. In fact, 2018 is on pace for yet another record year for both deal counts and transaction value, coming on the heels of a blockbuster 2017. Both figures were ahead of those in 1H 2017—the 1,358 deals worth a combined $178.5 billion from 1H 2018 were 16% and 5% increases, respectively, over the same period last year. [See chart below for details.]
Keep in mind that the second half of most years are much stronger than the first half, so 2018 has a good chance of being a second record year in a row.
One thing to ponder is this: Look at the impact the last recession had on private equity activity in the middle market, which you can see in the 2009 of the chart above. In the midst of the recession PE invested in only 744 businesses worth at total of $75.2 billion, less than half the total deal value through the first six months of this year alone! And the recovery year’s totals, in 2010, were nearly the same for the first six months of this year.
This clearly points out the danger of waiting too long during this current seller’s market to make a move with your company. As PitchBook points out there are a few storm clouds on the horizon:
Two macro developments should also be considered going forward: the ongoing tariff situation that will affect broad swaths of the middle market, and the steady increase in interest rates coming from the Fed. Interest rates in particular are worth noting, as higher interest payments can have an outsized impact on cashflows over time.
Keep in mind that most private equity transactions have some component of financing included in the transaction. Rising interest rates (or even the fear of rising interest rates) can cause PE firms to revalue their perspective on acquisitions. This not only drives down business valuations, but also causes some deals to be scuttled all together when the numbers do not add up to a sufficient ROI.
So, if you own a business, you have two choices:
If you are like most business owners, a significant portion (if not all) of your net worth is tied up in a highly illiquid asset: The business. Finding out your company’s market value is an important first step in managing your wealth and financial future.
To learn more about your exit planning options and how to begin the process, contact one of our exit planning professionals at 972-232-1121 or visit our website, provide us with your contact info, and we will be in touch.
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2018 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.
Success, you have been added to our list.
it all started with a conference.
start your story today,
speak directly with one of our senior advisors +1-972-232-1121