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Vistage webinar feb 19 2015
- 1. The Middle Market:An Overview of the Key Players From Private Equity to Investment Banking Sam Jacobs, SVP Axial February 2015
- 2. My Background • Earlyemployee 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
- 3. Agenda • Key Trendsin 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
- 4. Key Trends inthe Middle Market
- 5. The Democratization ofCapital More Op(ons & Greater Availability of Capital Than Ever Regulatory Industry Technology
- 6. 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
- 7. The emergence ofspecialization “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
- 8. Having a viewof 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
- 9. Technology is shiftingthe paradigm 89% CEOs who start their research and evaluation of a business or financial partner using online tools
- 10. Technology is shiftingthe paradigm More Transparency Greater Efficiency Better Decisions
- 11. Remember the ValuationGap? 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
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- 13. Traditional Private Equity 4,000in 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
- 14. Strategic Buyers 150,000 inthe 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
- 15. Family Offices 10,000 inthe 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
- 16. Independent Sponsors 1,500 inthe 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
- 17. Search Funds 1,000+ inthe 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
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- 19. Investment Banks 4,000 inthe 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
- 20. Business Brokers 5,000 inthe 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
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- 22. 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
- 23. 10% Time buildingrelationships to preserve and maximize value Be a 90/10 CEO
- 24. 24 Additional Resources SEARCH FORMIDDLE 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/
- 25. Thank You. Questions? Getin touch • Email at sam.jacob@axial.net • Visit www.axial.net
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