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. “2nd 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.

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