Author: dev_team

The unprecedented increase in capital in the private equity sector is forcing private equity firms to differentiate themselves to remain competitive. Private markets are at historical highs with a staggering $2.6 trillion allocated to private equity groups in the last ten years, according to Pitchbook. As median deal size and EBITDA multiples continue to climb, owners of private businesses are looking for more than just a large multiple to sell. The lower middle market is filled with passionate executives that have either founded their companies or are leading businesses that have been in their family for generations.

As median deal size and EBITDA multiples continue to climb, owners of private businesses are looking for more than just a large multiple to sell. The lower middle market is filled with passionate executives that have either founded their companies or are leading businesses that have been in their family for generations. PE firms must adapt to this hyper-competitive market where owners are receiving several offers from a wide range of interested buyers.

PE firms can distinguish themselves through an executive-led buy-and-build strategy. An experienced industry executive will attract prospects that otherwise may not have considered answering the phone. Today, more than ever, owners are aware of the surplus and diversity of their options due to the growing number of potential buyers with adequate capital eager to purchase their businesses.

Sellers still require a valuation deserving of their business, but with several options available, they will place substantial weight on overall fit, potential synergies, and – most importantly – continued care of their employees and culture post-transaction. Many of these owners have personally built customer relationships and strong reputations that they would like to see continued long after they’ve exited the business.

By partnering with accomplished executives, private equity firms are more likely to win deals in a competitive market and quickly gain the attention of relevant add-on acquisition targets.

Please contact us to learn more about how we can help you work with executives on acquisition searches.

With a current sourcing project in commercial product distribution, we reviewed consolidation trends in the industry. Examining Pitchbook data from the past three years on acquisitions of distributors by U.S.-based private equity firms, we found that transactions within the sector have steadily increased, especially in the past year and a half. Meanwhile, total transactions in other industries such as healthcare and logistics have decreased or remained flat in the same period. More importantly, add-ons represent a higher portion of private equity-backed acquisitions in distribution–more than

With a current sourcing project in commercial product distribution, we reviewed consolidation trends in the industry. Examining Pitchbook data from the past three years on acquisitions of distributors by U.S.-based private equity firms, we found that transactions within the sector have steadily increased, especially in the past year and a half. Meanwhile, total transactions in other industries such as healthcare and logistics have decreased or remained flat in the same period. More importantly, add-ons represent a higher portion of private equity-backed acquisitions in distribution–more than

With a current sourcing project in commercial product distribution, we reviewed consolidation trends in the industry. Examining Pitchbook data from the past three years on acquisitions of distributors by U.S.-based private equity firms, we found that transactions within the sector have steadily increased, especially in the past year and a half. Meanwhile, total transactions in other industries such as healthcare and logistics have decreased or remained flat in the same period. More importantly, add-ons represent a higher portion of private equity-backed acquisitions in distribution–more than

As valuations continue to increase in the market, deal volume is predicted to decline. In Pitchbook’s most recent M&A report for 2Q 2017, they predict that the United States is “on pace for 18.5% and 23.6% year-over-year decreases [in total deal volume and value], respectively” from 2016 to 2017. While high multiples are deterring strategic buyers from making acquisitions, PE and other sponsor-backed buyers must continue to strengthen their portfolios.

Pitchbook reported “sponsor-backed acquisitions have grown steadily from 24.7% of all transactions in 1Q 2016 to 29.8% in 2Q 2017”, up more than five percentage points in a little over a year. A primary driver of this growth is strengthening add-on acquisition activity which continues to increase in share of deal flow—now at 57% of all deals, continuing a seven-year increase (see chart below).

More and more PE buyers are holding onto and growing their current investments instead of pursuing new platforms. As a result, we’ve seen our clients are focusing more on add-on acquisitions for their existing portfolio companies versus new platform investments.

We see a lot of opportunity to build stronger platforms through add-on acquisitions, but it requires a different approach. At Normandy, with our knowledge and resources, we can successfully research and contact strong target companies to grow your portfolio companies in this increasingly competitive market.