Platform Acquisition

By Capital Markets


A platform company is generally known to be the initial investment that allows a Private Equity (PE) firm to take a step into a new industry. All with the fixed objective of then adding to the platform through the acquisition of a number of smaller firms that are complementary to the platform’s operations. In order to illustrate this particular method of operation, we are using a case study from a private equity firm called Pfingsten. As a PE firm that focuses primarily on the acquisition of middle-market companies, through establishing a partnership with Brian Dunsim, a printing/packaging veteran, Pfingsten embarked on the first of many steps in their aggressive strategy to create a new packaging entity.

The middle-market is essentially defined as any company with a value below $500 million and the lower middle-market are those worth less that $100 million. Pfingsten’s investments are usually made within the manufacturing, distribution and business service operations sectors with valuations between $15 and $100 million, revenue from $20 to $150 million, and/or EBITDA of $3-$12 million (EBITDA = earnings before interest, taxes, depreciation and amortization). It’s likely that these numbers – though not stated – are for platform acquisitions; subsequent “add-ons” could be much smaller. As presumed, one of their listed transaction types are “strategic add-on acquisitions for platform companies.”

Why This Should Matter to You

This transaction is just one of many examples of an equity firm operating in the lower middle-market, making very targeted and well thought-out acquisitions to complement an initial investment in a particular industry. There are dozens of firms doing the same in a myriad of industry segments. In fact, it’s likely that there are many companies doing the same in your industry that you may not be aware of, but Generational Capital Markets (part of the Generational Group) are.

Our buyer database contains tens of thousands of registered organizations/entities that have told us specifically what types of businesses they’re interested in acquiring or investing in. We use this information to create targeted buyer lists that help us to attract the attention of professional buyers. One under-publicized benefit of partnering with a lower middle-market focused PE firm like Pfingsten is that not only do they provide an initial capital investment in their targets, they also provide post-acquisition support in the form of professional management, financial acumen, operational expertise, and sales/marketing experience.

If you are the owner of a privately held company and are looking for a partner to fund your growth, be sure to put PE firms on your buyer list. Your company may not be large enough to be a platform acquisition, but it might be possible to be “added on” to a synergistic portfolio holding.

To learn more about how this process works, contact us today and request a discussion with one of our senior business advisors.