Private Equity Groups Growth

One of the major market shifts for the acquisition of privately-held companies has been the growth in the number of Private Equity Groups (PEGs). PEGs have become key players in business acquisitions. They offer flexibility as a liquidity source, giving entrepreneurs the ability to take some cash off the table, recapitalize their company or simply sell and move on. What do PEGs look for in an acquisition?: ongoing, profitable businesses that demonstrate growth potential.

The private equity market had traditionally been restricted to acquiring larger companies. But increased competition for those larger operations, the greater growth potential of smaller firms, and an easier path to investment of smaller firms. The primary ingredients that PEGS look for in an acquisition are:

· Superior profit margins
· Sustainable and defensible market niches
· Unique business models
· Stable product life cycles
· Strong growth opportunities
· Strong track record
· Low customer concentrations
· Deep management team

PEGs have become a major force in the acquisition arena. They can also be thought of as strategic acquirers in certain instances, when they own portfolio companies in your industry or a related area that addresses the same customer base. These buyers may be in a position to pay more than an industry or strategic buyer that does not have this financial backing.