Continuing with our weekly M&A digest, we take a look at the future of private equity’s involvement in M&A activity, how private businesses power the, things to consider for business owners that are close to retiring, and why businesses should consider private equity firms as buyers.
“A recent study has proven what many of us have known for years: Small, privately owned businesses are critical to our economic health.”
“[The study] based their findings on studying small businesses that were locally owned – employing between 10-99– in counties around the country. The researchers found that smaller businesses do more than simply provide jobs for local community members. Quite often these smaller firms also instill innovation and on a local level that larger companies do not provide.”
“If you’re a business owner, deciding to retire is much more complicated than if you’re an employee. Although you will go through many of the same emotions and have to make your decision based on personal factors, the complicating issue is deciding what to do with your company when you decide to retire. Because your decision is more complex, reaching the decision to retire for entrepreneurs must be well thought out.”
“A few weeks ago, when the market was gyrating like a drunken sailor, a quick survey of major private equity professional buyers was taken. The primary question: What will happen to the acquisition plans of equity firms if the market truly tanks? The answer was interesting: Not much will change!”
“The reality is that professional buyers who work at these equity firms have long-range plans that go beyond a day or two of market volatility. Unless the market truly tanks – as we saw in late 2008 – equity firms will continue to spend all of the dry powder they have to make strategic (dry powder = capital committed to funds by investors). And despite recent volatility, a decline as we experienced in 2008 is not expected. The underlying economic fundamentals are far too sound when compared to 2008.”
A recent sale of a middle-market business proves that the perception of private equity firms as “corporate raiders” is far from the truth.
“Firms that focus on acquiring smaller companies do so for one reason: to grow them. The only way a fund in this niche can earn an ROI (return on investment) on each target is to invest capital and provide professional management to help them grow revenue and profits.”
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