Companies Making Strategic Acquisitions Create Opportunities to Sell Your Business

By Generational Group

09/07/2016

Recently, the nation’s largest mattress retailer announced it was being acquired by a company based in South Africa. According to published reports, the acquisition is part of the acquiring company’s goal of expanding into the U.S. market. While many large transactions make the news, the fact is that there are many private equity firms from the U.S. and abroad looking to invest in mid-market companies.

According to PitchBook, “midway through 2016, over $154 billion has been raised across 195 North American and European PE vehicles, on pace to make percent 2016 the second best fundraising year since 2008.

Buyout funds made up 77% of total PE contributions during the first half of the year, higher than any other year on record.”

“One of the key factors in maximizing the value of your business is understanding and identifying people who would consider your business a strategic acquisition,” said Terry Mackin, Managing Director of Merger & Acquisitions with Generational Group, a leading North American M&A consulting firm.

“Someone making a strategic acquisition may see more value in the company being acquired than another buyer who may not have as much of an integral understanding of the space.”

Many private equity firms are seeking highly targeted acquisitions that focus on a fragmented industry with growth prospects. They will often seek out a platform company and then spend the next 5-7 years bolting on to the platform with the acquisition of smaller businesses, usually quite a bit smaller than the original platform company.

“Since 2006, add-ons (also called bolt-ons) have been a dominant way to grow for many equity players,” said Carl Doerksen, Director of Corporate Development with Generational Group.

“The era of acquiring a billion-dollar player and hoping to help it grow are relatively rare now, so many private equity firms are moving to smaller transactions.”

“The equity firms we deal with, many of which specialize in transactions valued below $100 million, invest in companies with a great upside that will benefit from professional management to thrive and grow,” added Mackin.

“Unfortunately, many smaller companies are not prepared to take advantage of private equity offers because they have not prepared their company for the sale process.”

“Others, who may wish to sell need professional help in identifying private equity buyers or other potential buyers. Failing to take these two important steps – preparing your company for sale and identifying all of the potential buyers – can leave money on the table for the hard-working business owner,” stated Doerksen.