The M&A Weekly Digest today shares articles about data showing high involvement by private equity firms in the middle market; a deal between Ritz Camera and Transom Capital that shows business owners another alternative to outright selling their business; and insight into why investors view private equity favorably.
PE Firms Highly Active in Middle Market, ACG Data Says
“[S]ince 2001 private equity firms have made 12,000 investments (investments equal either 100% purchase of a company or a partial acquisition). If you factor in purchases by portfolio companies (a.k.a. add-ons), the total rises to 15,500 companies.
Since many of the companies acquired since 2001 have been re-sold or taken public, the total number of companies current held by equity firms in the U.S. is approximately 6,000 according to ACG. Here is the really compelling part – the part that I am sure will also surprise you – approximately 50% of these companies currently held by equity firms are middle-market companies.”
The Partial Sale – A Win-Win Scenario For Business Owners Not Ready To Part
If you’re a business owner that lacks the capital to grow your company but you want to stay involved in daily operations, there is an alternative to outright selling your business. There are equity groups that specialize in partnering with existing ownership to invest in the future growth of the company. A recent deal between Ritz Camera and Transom Capital highlight this type of equity firm.
Why Investors View Private Equity Favorably
“[B]ecause of the positive returns available to them, investors continue to flock to private equity as a sound investment vehicle. A few weeks ago, one of the largest pension funds in the U.S., The Employees Retirement System of Texas, approved a plan to commit $3.71 billion to private equity over the next five years to reach an 8% allocation target. As of July, only 2.84% of the fund was allocated to private equity.
As you can see, this represents a significant increase in the amount of money this pension fund is allocating to private equity investments. Why are they making this additional investment? Although details regarding “why” were not released, it’s pretty clear that if they didn’t expect to generate a solid return, they wouldn’t be making this hefty increase in PE investing.”
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