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Private Equity Firms Drive Increased Demand for Lower-Middle Market Acquisitions

June 08, 2017, 07:12 AM
Filed Under: Mergers & Acquisitions

Analysts with Generational Equity, a mergers and acquisitions advisory firm for privately held businesses, are reporting an increasing demand for lower middle-market acquisitions by private equity firms.

According to a survey by PitchBook, close to $119 billion was invested by private equity firms in the first quarter of 2017 alone. And, according to the research firm, nearly 50% of those deals were valued below $25 million; evidence of the interest private equity has in lower middle-market businesses.

"The decision to hire an experienced M&A firm may be the best and most important decision a business owner will ever make, particularly when it comes to having the opportunity to sell to a private equity firm," said Terry Johnson, Chief Revenue and Strategy Officer with Generational Equity. "These firms have deep pockets, are open to flexible deal structure, and are in the business of acquiring companies to add to their portfolios. Gaining access to these private equity buyers is one of the many value adds the right M&A firm can bring to the table."

Generational Equity recently assisted in the acquisition of Fogco Systems, located in Chandler, Arizona by Pinewell Capital. Pinewell Capital, located in Scottsdale, Arizona, is a private equity firm focused on investing in lower middle-market companies. The firm seeks to partner with experienced business owners in management buyouts, management transitions and companies pursuing funding to grow.

In addition, Generational Capital Markets, a Generational Group company affiliated with Generational Equity, assisted Fort Wayne, Indiana-based Ellison Bakery, Inc., a leading manufacturer of cookie, snack bars and other products for the retail and private label space, find a partner in Blackford Capital, a national private equity firm headquartered in Grand Rapids, Michigan.

Founded in 2000, Blackford Capital is a private equity investment firm that acquires, manages, and builds middle-market manufacturing, distribution, and service companies.

"Private equity firms are active buyers who recognize value and are willing to pay for it," said Johnson. "Failing to tap into this market when selling a business can unnecessarily limit a business owner's options, and potentially cost an owner millions."

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