THE PE ALTERNATIVE

Owners and stakeholders of companies with strong cash flows, defendable market positions, products and services in expanding markets and a management team capable of driving the business forward must consider private equity (PE) groups, or financial buyers, as a viable alternative to exiting their business. Although these groups vary in size and focus, most PE groups bring a level of sophistication to the transaction process rarely matched by other prospective buyers. Return on investment is the name of the game; therefore, cash flows and management team depth and quality drive value and purchase prices.

The advantages of PE buyers:

• Flexibility with transaction structure;
• Cash/access to capital – new acquisitions, diversify risk;
• Management drives growth; shares upside potential;
• Additional returns for owners/stakeholders; i.e. “2^nd bite of apple;”
• No business disruption; maintain customer loyalty, employee morale;

The disadvantages:

• Growth-focused; upside potential reliant on management team solely;
• May be highly leveraged; Debt – no room for error;
• Short-term owner/stakeholder participation;
• Increased reporting requirements; financial/operational;

An experienced M&A Team can help business owners understand their alternatives and choose the right option to maximize the value of their business and achieve their long-term goals.