The titans of finance are now courting plumbers and electricians… Yes, you heard that right. Now that the cost of capital (debt) has gone up, ‘going big’ in the PE world has given way to ‘going small’.
While mega deal activity has dried up, private equity dealmaking with smaller ‘mom and pop’ founder-led businesses has increased dramatically. This dynamic is detailed today in the attached Bloomberg article.
As the article discusses, this dynamic is leading to some interesting developments. Smaller family-owned businesses are increasingly the target of relentless and constant offers from PE funds looking to buy their business. My guess is that — as this article alludes to — small plumbing companies and lumber yards have never felt so popular.
Done correctly, PE funds that are able to consolidate these smaller mom and pop businesses have a lot of upside to gain through consolidation.
However, there are downsides as well.
These businesses are usually not run to the same tight standard that most private equity professionals are accustomed to. Consolidation of top line revenue works. However, there is a lot of ‘cleaning up’ that needs to take place in accounting, finance, and reporting.
This is where E78 Partners excels. We are the partner that private equity funds turn to when they need to professionalize both the finance and tech aspects of these smaller consolidation plays.
Reach out to us today to see how your fund can leverage our capability to successfully execute your consolidation strategy.
© Copyright July 2023. Marc Patterson. All Rights Reserved.