I recently attended an M&A conference in Dallas, TX, and was very impressed with the current amount of interested buyers and collective capital that exists among Private Equity Groups. These active investors, numbering in the thousands, are searching right now to purchase viable companies in cities, both large and small, throughout the United States.
According to the 2017 Spring Annual Report, published on the Investment Council.org website to illustrate components of the Private Equity Industry, there are over 4,000 PE firms in the United States spread from coast to coast. Collectively, they own over 14,000 companies, employ millions of Americans, invested over $600 billion in 2016 alone, and have over 1 trillion dollars in capital to continue to acquire companies. (The amount used at the conference was $1.5 trillion, which is the highest amount that I have ever seen).
Due to the populist politics of the industry, however, despite their widespread influence and reach, this group is still often perceived as beginning and ending solely in “Wall Street” and acquiring companies or buildings primarily in downtown Manhattan. This simply is not the case in today’s world.
Current efforts by PE firms everywhere have expanded far beyond talking with close networking ties to discover and approach stable companies to acquire. They scour online data in order to:
- Build spreadsheets and analytical reports
- Measure city, county, and state economic activity in all parts of the country – including the Front Range of Colorado
- Research industry trends
- Dive into the personal stories of people that work in local companies they acquire
Such characteristics highlight, even more so today than in times past, the importance of having an experienced professional who knows what these PE firms are looking for and to present your company in the best possible light; which, typically translates into closing the deal with terms that are as favorable to the seller as possible.
The detailed and comprehensive amount of information these PE firms require adds to the perception that while capital might be available in the marketplace, it is out of reach for many companies looking to sell. While this process of due diligence can be extensive, its purpose is both reasonable and responsible. In addition to showing how their investment is very likely to provide a positive return, they also want to do well within the community they are located.
The American Investment Council’s Spring 2017 report1 states:
“Many portfolio companies are rooted in communities that likely know their history; their successes and their failures. When a PE firm acquires a company, they are not only investing in that company’s future, but those connected with its past – employees and the consumers it serves – enjoy the benefits of success along with the firm and its LPs.”
In the past five years, cities along the Front Range (Ft Collins, Denver, Colorado Springs, etc.) have consistently been rated among the top five or top ten areas to live and work. Colorado has recently been identified as the state with the best economy in the nation and we are high on the radar screen for many acquirers.
If you feel that now might be the right time to sell your business, give us a call for a free, confidential, no-obligation consultation. Private Equity firms and other acquirers are actively searching to find successful businesses to acquire and help grow. An experienced intermediary firm like The FBB Group, Ltd., with roots in Colorado dating back to 1982, enables sellers to be positioned in the market to be attractive to Private Equity Groups, strategic acquirers, family offices, and high net worth buyers.
The majority of our business is derived from referrals. Please consider referring our services if you encounter a situation involving the potential purchase or sale of a business.
Ronald V. Chernak
Inspiring business relationships since 1982!
(originally posted in the June 2017 newsletter)