Lower mid-market company sales are often influenced by larger M&A deal flow. A recent article on the Forbes website illustrates this point. Here’s why.
Acquisitions of “platform” entities often result in a search by the new ownership for “add-on” acquisitions. The targets are comparably sized or smaller companies in related fields. “Platforms” are businesses viewed by investors as a starting point for further acquisition, “add-ons”.
The goal is to grow both the acquired company’s top line and bottom line. Smaller companies become very attractive targets to support this strategy. The processes we employ in transactions helps connect larger entities with smaller ones.
Our niche is private companies that are still run by the founders who started the company, built it to an operational level that has sustained employment and lifestyle for years, and now is mature but with an uncertain future. Owners are wondering what to do next.
We find that these companies are often too big for an individual to acquire, but too small to be considered a “platform.”
The article referenced above is on the Forbes Magazine website. The Forbes Finance Council predicts that M&A activity will continue strong in the months ahead.
The piece is authored by investment banker Marc Cooper of P J Solomon who makes two key observations.
While much of this investment will involve large deals, the kind that hit the media on a regular basis, it inevitably inspires activity downstream in the lower mid-market – the niche we focus on.
"The entire process went smoothly and professionally. The BTS team kept me fully informed at every step. They worked hard and were effective in bringing the deal home."
"Skip and I continue to be grateful for all you have done to make the sale of Pure Flow come to fruition."
"BTS’s level of expertise in the process and close attention to detail enabled us to successfully navigate the deal."
"These types of transactions are often long and complicated and I doubt it could have been successfully completed without your close ongoing involvement."
"The outside objective point of view that you have brought us has been invaluable as we prepare for the rapid growth."
"John then found the right buyer and coordinated a seamless transition—he doesn’t miss a single detail."
"John immediately identified our strengths and experiences and discussed a business that ultimately was more in line with our goals."
"The BTS team came in, evaluated everything in a professional and thankfully non-threatening manner."
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We often hear from founders who feel they have hit the ceiling with what they can do with their companies. Buyer groups in the market see this as an opportunity.
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Strategies for growth or time to sell?
Has your business gotten to the point where it could grow but you’re not certain about taking the risk?
Precision Machining Company
Initially, liquidation was a serious consideration. It would offer a quick exit but would hurt loyal employees and disrupt the customers who had come to rely on its quality production.
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Our client owners could dig in for the long haul…However, this would take five years or more. Owners simply lacked the horsepower to do it.
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Owners decided they wanted to retire. They also wanted to be fair to the staff who had been loyal to them. Could the company be sold, the staff retained and the facility remain in use?
Magnetics Company with High Profile Customers
(T)he manufacturer would need to focus on growing EBITDA to capture interest from major strategic buyers and achieve a higher multiple of earnings.