The easy financing required to enable highly leveraged deals has disappeared, and business buyers are setting their sights lower and lower in the middle market in order to put their money to work.
According to private equity research firm PitchBook Data Inc., lower middle-market deals accounted for about 70% of the 407 transactions completed in the first half of 2009 by buyout funds. Although the lower middle-market activity was healthy, overall activity was down. “The decrease in private equity investment is not due to a lack of available capital,” the report said. “PE investors continue to raise capital and currently have enough dry powder to more than support the combined deal activity of 2004, 2005 and 2006 with the use of moderate leverage.”
Our experience at the Woodbridge Group is in line with the report. The demand is evident while supply is short. We currently have a company on the market that has received over 30 offers! That is incredible in any economy, and illustrates the pent up demand for performing companies. Although the PitchBook data covers only private equity, we’ve seen that many strategic buyers have also lowered their sights, but continue to seek acquisitions.
By the way, wondering what Lower Middle Market means?
- Lower middle market companies are typically Privately-Held
- Lower middle market Companies are typically generating between $5 and $100 million in revenues
- Lower middle market companies are typically generating EBITDA between $1 million to $10 million
Want to learn more? Download my free ebook at www.compasspointcapital.com