Vistage webinar feb 19 2015
26
The Middle Market: An Overview of the Key Players From Private Equity to Investment Banking Sam Jacobs, SVP Axial February 2015
-
Upload
axialinc -
Category
Small Business & Entrepreneurship
-
view
808 -
download
0
Transcript of Vistage webinar feb 19 2015
The Middle Market: An Overview of the Key Players From Private Equity to Investment Banking
Sam Jacobs, SVP Axial February 2015
My Background • Early employee at GLG, over
$200M of equity and $100M of debt raised
• Worked in middle market
investment banking and financial consulting
• Run all revenue and membership
operations for Axial beginning in 2010 and working closely with over 21,000 Members across the world
Agenda • Key Trends in the Middle Market
– Democratization of capital – Market fragmentation – Emergence of specialization – Technology to bridge the gap
• Key players in the middle market – Buyers
• Private equity • Strategics • Family offices • Independent sponsors • Search Funds
– Advisors • Investment bankers • Business brokers
Key Trends in the Middle Market
The Democratization of Capital
More Op(ons & Greater
Availability of Capital Than
Ever
Regulatory Industry Technology
Private Equity Firms
Strategic Buyers
M&A Advisory Firms
Private Equity Firms
Individual Investors
Family Offices
Search Funds
Pledge Funds
The Middle Market Fragments Further Business Broker
The emergence of specialization
“The days when private equity fund managers and investors could make out-‐sized returns through plain vanilla, debt-‐fueled buyouts are over. Some of the best opportuni(es today are in specialist private equity funds that stretch the boundaries of the asset class.” – Forbes.com
Having a view of the middle market landscape
Buyers
Advisors Investors
How do you evaluate and make a decision?
1. Lack of easy access to information to help qualify and evaluate
2. No efficient way to understand and navigate large universe of potential advisors, investors, buyers
Technology is shifting the paradigm
89%
CEOs who start their research and evaluation of a business or financial partner using online tools
Technology is shifting the paradigm
More Transparency Greater Efficiency Better Decisions
Remember the Valuation Gap?
40% Owners who receive a lower offer for their
business than expected
Informa(on about what makes your company valuable
Rela(onships with buyers and advisors to maximize your op(ons
The Key Players Buyers
Traditional Private Equity 4,000 in the US
PROS CONS
• Deep deal experience • Helpful at crea(ng strategic
op(ons for the business • OSen partnered with
industry operators that implement opera(onal excellence
• Financially oriented and less interested in strategic value of assets
• Fund mandate means rigidity around investment criteria
• Defined investment (me horizon means they are defini(vely looking for an exit
Strategic Buyers 150,000 in the US (Companies >$10M in Revenue)
PROS CONS
• Benefit from strategic value of assets
• Strategic value means higher willingness to pay
• Opera(ng from broader balance sheet
• More pa(ent capital due to strategic considera(ons
• Harder to iden(fy • OSen have to fit into (ghtly
defined pre-‐exis(ng criteria and align with strategic priority of the business
• Not perpetually in the market
Family Offices 10,000 in the US
PROS CONS
• Not inves(ng out of a commiVed fund and thus much more flexible in deal structure
• Pa(ent capital without mandate to exist
• Less valua(on sensi(ve
• OSen not bringing strategic or ins(tu(onal exper(se to a specific deal
• Not perpetually in the market
• Difficult to iden(fy and locate
Independent Sponsors 1,500 in the US
PROS CONS
• Seasoned deal professionals
• Less constric(on then typically funded private equity
• Can move quickly and execute with speed
• No commiVed fund means there is implicit execu(on risk as they pool investor interest
• Lack of visibility on real funding capabili(es
Search Funds 1,000+ in the US
PROS CONS
• Highly mo(vated • Interested in smaller
opportuni(es
• Less opera(onal experience
• Execu(on risk due to pooled capital considera(ons
• Can have geographic constraints
The Key Players Advisors
Investment Banks 4,000 in the US
PROS CONS
• Seasoned deal professionals
• Skilled at crea(ng great outcomes for their clients
• Deep networks and rela(onships coupled with industry knowledge
• Fees driven by deal size mean they oSen can’t work on smaller opportuni(es
• Retained advisors generate the best outcomes but can impact small company cash flow
Business Brokers 5,000 in the US
PROS CONS
• Work on smaller opportuni(es
• Perfect for geographically constrained or local businesses
• New regulatory requirements ease the compliance burden
• More accustomed to a “lis(ng” process
• OSen less experience with larger transac(ons
• Opera(ng on success-‐only basis can mean looser controls around distribu(on of informa(on and confiden(ality
Takeaways
q The middle market is an incredibly diverse and fragmented landscape
q The landscape has evolved significantly and there are numerous credible funding sources that can be overlooked or misunderstood at first glance
q CEOs and market par(cipants are well served to understand the landscape
q Tools and technology should be used to manage the market and gain visibility and access to these cons(tuents
Recapping
10% Time building relationships to preserve and maximize value
Be a 90/10 CEO
24
Additional Resources SEARCH FOR MIDDLE MARKET PLAYERS ON AXIAL
Ø https://network.axial.net/search Ø http://www.axial.net/business
ARTICLES ON THE MIDDLE MARKET Ø http://www.axial.net/forum/3-reasons-specialization-matters-private-equity/ Ø http://www.axial.net/forum/proliferation-boutique-investment-banks/ Ø http://www.axial.net/forum/fragmented-capital-markets-mean-dealmakers/ Ø http://www.axial.net/forum/rise-independent-sponsors/ Ø http://www.axial.net/forum/changing-search-fund-model/
March 19, 2015 26
