The amount of capital that has been committed to private equity (PE) firms has reached an all-time high, according to recent research from Preqin, a leading research firm focusing on the alternative investing industry. Also known as dry powder or capital overhang, the amount of funding available is now over $800 billion, with the largest portion being dedicated to “buyout” funds:
This is great news for owners of privately held companies, because the majority of the buyout funds shown above (at well over $500 billion) is eventually going to be used to invest in middle-market companies.
As you can see, buyout funds have grown significantly since 2012. Since most of these funds have a limited lifetime in which to invest in, usually 5-7 years, the next several years should be very active for these investors.
And what are they looking to invest in? Profitable, growing, well managed companies that have several things in common:
Now certainly there are a myriad of other features that these PE firms are also looking for, many of them being industry-specific. However, in general, if your company meets these three key metrics, you may be a target for a private equity firm.
One major caveat: Since many of these firms retain existing management in a minority ownership position, you MUST be willing and able to relinquish control, accept advice, and be ready to change in order for a PE relationship to work. If you are willing to do so, then the benefits of partnering with one of these groups can be substantial. Here is what a few of our clients have to say about it:
As you will hear, the win-win of these PE relationships is that the investment firm not only brings capital to the equation, they also provide marketing, sales, and financial expertise that most business owners simply do not have access to nor can they afford. This is a substantial benefit.
If you are interested in learning more about how PE firms operate, or all buyer types, then you should set aside a few hours and attend a Generational Equity educational, complimentary, exit planning workshop. An investment like this could pay off handsomely for you over the long term:
To find out if your business meets our criteria to attend a seminar, please call us at 877-213-1792 or visit our website, provide us with your contact information, and we will reach out to you.
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2016 Generational Equity, LLC. All Rights Reserved.
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