Private equity firms are poised for growth, with an eye on the middle market

Market volatility and political uncertainty have left many middle-market business owners wondering if now is the time to sell their business. Fortunately, private equity firms are not holding back, and middle-market companies are a big part of their growth strategy.

Diversification, add-ons and the buy & build strategy

A private equity firm approaches each purchase of a business as part of an overall growth strategy. Some of the more popular strategies include diversification, add-ons and buy & build, all of which are good news for middle-market businesses.

For those private equity firms looking for general growth in their portfolio of businesses, diversification is a safe strategy. Firms will purchase companies in a range of different industries, similar to investing in the stock market, which allows them to reach long-term financial goals while minimizing risk.

In comparison, a private equity firm looking to grow a specific platform, will often purchase or “add-on” middle market companies of various sizes. This strategy has recently grown in popularity, and according to Pitchbook’s Eliza Haverstock:

“Through 3Q 2019, add-ons accounted for 68.7% of middle-market deal count and 57.6% of deal value. A decade ago, add-ons garnered only about 30% of middle-market deal value and less than 60% of deal count.”

The buy-and-build strategy, is when a private equity firm purchases an established business and then uses that company to acquire smaller entities, ultimately merging them into one large company.

What private equity growth strategies mean for the middle market

Middle market companies are prime acquisition targets for equity firms looking to use one of these strategies. The volume of middle-market companies alone opens up investment opportunities in many different industries. 

According to Bloomberg Law’s Analysis: U.S. M&A mega year in review, the middle market saw 815 deals in 2019 alone, which accounted for 78 percent of the number of deals announced in the middle, large, and mega markets last year.

Funding is available and ready to be used 

Funding is not an issue for private equity firms. The capital is ready and waiting, according to a recent Forbes article by Patrick Galleher, Managing Partner at Boxwood Partners:

“Private equity dry powder (which is the amount of cash reserves or other liquid assets available to a business) is reaching record highs. Data provider Preqin estimates there is $2.44 trillion in dry powder waiting to be spent on leveraged buyouts, real estate assets and more.”

Private equity firms looking to buy do not have to wait for the funding, and more will be comfortable diving into deal making knowing they have the backing needed for the purchase.

Ensuring the best value for your business

Private Equity firms are poised and ready to buy, and while many are open to working with business owners directly to broker a sale, this does not always guarantee the best price for the seller. 

How does a business owner ensure they are getting the best possible deal? 

Investment bankers, such as Liberty Ridge Advisors, work in the seller’s best interest, helping to navigate the more than 8,000 Private Equity funds available in the market right now. Our team of experts performs the necessary due diligence to find the optimal Private Equity fund for both valuation and fit for your organization. We help prospective sellers get the best offers and attract the best funds, optimizing their profitability. 

Middle-market opportunities abound

Middle-market business owners thinking about selling their business should take advantage of private equity firm’s robust funding power and growth strategies. The first step starts with creating a team of knowledgeable professionals who can help with the successful sale of your company. 

We at Liberty Ridge Advisors are here to help you with your investment banking needs and are happy to answer any questions you may have about the sale of your business. So we’re able to better assist you, please let us know about your selling timeframe in this brief questionnaire.

Michael Bennett
Managing Partner
mbennett@libertyra.com
(206) 422-0102

Leif Johnson
Managing Partner
ljohnson@libertyra.com
(206) 683-3814

About Liberty Ridge Advisors

Liberty Ridge Advisors provides merger and acquisition advisory services for Pacific Northwest privately held businesses including capital transactions, mergers, acquisitions and recapitalizations. Liberty Ridge Advisors offers concentrated experience and expertise in key industries including food products, aerospace, building materials and construction, general manufacturing and distribution, wine, and business and financial services. For more information about Liberty Ridge Advisors please visit our website at www.libertyra.com.   

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Contact: Michael Bennett, Managing Partner, Liberty Ridge Advisors, LLC
Email: mbennett@libertyra.com
Phone: (206) 422-0102