Historically so-called private equity buy and build platforms were something of a novelty. A number of investors attempted to differentiate themselves by pioneering growth by acquisition, but they were the exception. My, how times have changed…
It is now rare that we advise on a sale mandate that doesn’t include a significant number of private equity backed businesses, often within the strategic buyer’s group. Private equity portfolio companies have become the most prolific of corporate acquirers. Using the focussed language of acquisitions and with a relentless drive to deliver value via synergies, this shouldn’t perhaps be too much of a surprise. It’s worth bearing in mind that PE investors had dry powder (uninvested funds) of more than $2tn at the end of 2018.
Whilst the pricing of primary investments has continued to rise, so has the appetite for funds to follow their money, support management teams and strategies they are already comfortable with has followed suit.
So, for the business owner or corporate looking to divest what does this mean?
Unsurprisingly it is good news on several counts – the most obvious being that more interest and more buyers will drive up value, as, significantly, the PE backed buyer is likely to be a savvy, experienced and committed player. There will be little emotion and a willingness to participate in and deliver a process that will serve, in most cases, to reduce transaction risk. Finally, for PE backed buyers there is often a willingness to be creative around deal structures, perhaps around ongoing participation and reward for future growth not seen from other buyers.
At Springboard we have developed an expertise that sits at the heart of this market. We work with a number of PE funds in supporting their portfolio companies from identifying and originating acquisitions through to negotiation, arranging of funding and execution. Equally we have completed a number of sales (at strategic values) on behalf of founders to PE backed acquirers.