“TARGETED” PEGS

For many smaller middle market companies (less than $50 million in revenues), Private Equity Groups (PEGs) are “targeted” buyers that seek to acquire ongoing, profitable businesses with realistic growth potential. PEGs provide access to capital, offer insights and expertise, assist with improving market share and operating efficiencies, and have a clear exiting path.

Often times, PEGs will pay substantially all cash for an acquired company; however, the investment philosophies and transaction structure may take on many different forms depending on the sellers’ objectives.  These may include:

• Family Succession – allows family business to stay in the family; ownership acquired from the senior generation, achieving liquidity; active family members control with a financial partner.
• Growth Capital – provides access to non-recourse capital, diversifying risk.
• Management Buyout – provides key employees with a cash partner for ownership.
• Outright Sale – provides for the seller to transition into retirement.
• Recapitalization – owner sells a portion of the company, retains an equity interest and participates in the upside potential of the company.
• Strategic Buyout – maximizes sell price; cross-selling to PEG’s portfolio companies with same customer base.

The strategy and focus of PEGs varies widely; sellers’ goals and benchmarks must be stated upfront for a winning acquisition.