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The Buyer's Problem in the Middle Market

Some Strategic and Leveraged Buy Out (LBO) groups see or hear about over 10,000 acquisition opportunities each year, with only a very small fraction turning into legitimate candidates. Obviously, companies can have hidden problems or characteristics that can make them subsequently unsuitable, based upon the buyer's criteria. Massive deal flow is needed to identify optimal acquisition candidates.

For over a decade, Valufinder has consistently done a tremendous job of introducing us to quality companies in a variety of industries. We truly value their business development capabilities and look forward to closing more deals with them in the future. - A. Richard Caputo, Jr.
President
The Jordan Company, L.P.

The Institutionalization of the Buyout Market

The LBO market has evolved from a cottage industry in the early 1980's to over 2,000 professional firms with a massive repository of capital. Recently published estimates report that over $1 trillion of equity capital is available for deals. Many firms have raised funds from their limited partners by promising them unique investment opportunities, thus placing additional pressure on the deal managers to find sellers and expeditiously deploy the committed funds.

Standing Out from the Crowd

Buyout firm personnel are exceptional achievers who have reached lofty levels in the business world. It is, however, crowded at the top and incumbent upon M & A professionals to distinguish their firms from their peers in order to be successful. The typical procedures employed by many LBO firms, such as canvassing investment bankers, publishing acquisition criteria and attending trade shows in hope of being remembered, are no longer a guaranteed path to successful investing. Many are treading this overcrowded path. Queuing up to participate in sell side auctions only reinforces the perception that a buyout firm is part of the pack.

Most of us have a pretty clear idea of the world we want. What we lack is an understanding of how to go about getting it. - Hugh Gibson

Middle Market Dynamics

M&A in the middle market is inefficient. The sheer size of the market - over 250,000 companies - is daunting and many prospects are not captured on standard lists or in typical databases. Private owners are often unsophisticated about the M&A process. When a seller decides to sell, they usually contact someone familiar, such as a supplier, customer, and even a competitor or the last person who contacted them. The buyer who may be most eager may never learn about the seller.