Know Your Options – PEGs


There are a host of prospective buyers for lower middle market companies (less than $75 million in revenues), and every possibility should be explored, vetted and considered. One buyer-type that must be on every business owners’ radar are Private Equity Groups (PEGs). PEGs provide access to capital, offer insights and expertise, assist with improving market share and operating efficiencies, and have a clear exit strategy.

Cash is rarely an issue for PEGs. Depending on the sellers’ objectives, the investment philosophies and transaction structure may take on many different forms.  These may include:

  • Family Succession – active family members control with a financial partner; ownership acquired from the senior generation, achieving liquidity.
  • 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 sale price; cross-selling to PEG’s portfolio companies with same customer base.

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