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private equity | Small Business | Middle Market Companies
This article was previously published on the All Business section of the Forbes website on August 12, 2013. Michael Evans is a regular contributor offering small business advice to All Business followers. For more great small business articles visit AllBusiness.com, AllBusiness Experts and subscribe to Newport's blog.
In the first part of this article, I addressed the current strong environment for middle market M&A and the basic categories of buyers: private equity, strategic acquirers and family offices. How are these deals financed? Middle market company owners and their transaction partners have a range of different types of capital available to facilitate a transaction and create liquidity.
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There are increasing signs of a recovering U.S. economy and record setting amounts of capital sit in the hands of large corporations (“strategic buyers”), Private Equity firms (“PE”) and hybrid investors (neither strategic nor PE, for example wealthy individuals and family offices). Private business owners contemplating a sale are fortunately faced with a myriad of options. Add to these traditional middle market lenders, commercial finance companies and Business Development Corporations (BDCs) all flush with cash, it is no wonder that many company owners are confused and uncertain as to how to maximize the exit value of their business - or take some money off the table.
Most public companies engage in a formal strategic planning exercise at least every three years. Private companies often skip strategy development, considering it to be theoretical, even bureaucratic. Private companies tend to move quickly past formal strategy setting to take on “GOT” (Goals, Objectives and Tactics). They take this shortcut due to time constraints and because, in most companies, the CEO serves in effect as part-time chief strategy officer.
Being an entrepreneur means taking big risks. But not all risks are equal. Some risks, such as losing a key employee, represent a potential bump in the road. Others can be catastrophic, such as the impact of a recession. Some risks are obvious; others are easily overlooked.
