What is a private equity (PE) group anyway?  In simple terms, it is a group of investors who have committed capital to make investments based on a set of criteria they’ve developed.  This group will plan to make money as a value-added partner to the companies they acquire.  The criteria they develop explains what kind(s) of companies they are looking to invest in, the amount of money they will use for each and the targeted period of time for staying in the investment or for exiting, among other parameters. Based on this thesis or “business plan”, the group will raise funds from a variety of sources (could be pension funds, high net worth individuals, family offices, etc.).  There will be a targeted return for the type of investment they are making.  

The best of these groups truly do add value to the companies they purchase.  Their goal is to accomplish something other than making money –they will allow the companies they purchase to become more successful than they would be standing alone.  In many cases, a company will have reached a certain level with an owner who is ready to move on.  In the landscaping industry there are a number of groups that have specialized experience and expertise in running successful companies who are buyers for the right sellers.  In some cases, the PE firm might include in their criteria that the owner must join their team to grow the equity value of the company with them and then they harvest the results in years to come.  In other cases, the PE firm intends to build and hold the company for the longer term.  

Either way, the PE firm, like a larger company buyer, will be positioned to achieve economies of scale in applying technology, financial leverage and operational expertise to the company they purchased.   Over time, the private equity investors will (should) benefit from the increasing value of the company they purchased.  Each PE firm will have its own plan for achieving the increased value, but approaches that might include strategic planning as part of the larger group, leadership development, HR expertise, infrastructure investments, vendor relations, tax strategies, etc.  

Are you a candidate for a PE firm buyer?  In the past, most of these buyers would be looking for sellers having a minimum of $1mil EBITDA.  In these times of low interest rates and capital looking for good places for investments, there are more investors looking at enterprises below that level of EBITDA, but they continue to be focused on the middle to large sized companies.  There are buyers who are “rolling up” a number of smaller companies regionally to develop an attractively sized target for a PE buyer.  

Where are you in your process?  It is always smart to know what your company might be worth in the market and where you might be planning to go if you do care to transition your business.  If you’d like to discuss your situation, selling or buying a business or preparing your business for sale, please let us know. In the meantime, if you have questions or comments, I can be reached anytime via email: [email protected] or phone at: 224-688-8838. We’re here to help you harvest your potential.

Alison Hoffman

Alison Hoffman

has more than 25 years of experience in strategy, operations, mergers and acquisitions and delivering business-to-business client solutions. Her areas of expertise include managing operations for profitable growth, organizational design and strategy activation. She brings a wealth of experience through her work in evaluating, valuing and purchasing over 30 companies, leading company-wide cultural and business integration projects and consolidating best practices among business processes and corresponding computing systems. Read Full Bio