Business owners who have identified the one party—or handful of likely parties—on the other side of the table often understand they need assistance beyond what their other advisors will provide, but wonder what an M&A advisor will do to add value We’re able to attune our offering to the one-off or targeted transaction because it is our primary focus, not one we default into. We are able to charge less than traditional investment banks because we are not required to utilize and pay for the platform required to execute on full-out auctions.
Back in 2019, it was novel to base an investment banking practice on catering to this subset—a substantial group, but still a minority of all owners considering exit. Since then, targeted processes have become more prominent in the sale of middle market businesses at every size point.
The trend is most common among differentiated businesses expected to sell at lofty prices, often expressed in terms of EBITDA multiples of 10x or more. Buyers in these favored categories are requiring deeper confirmation through specialized analytics and due diligence. This establishes a “table stakes” threshold for would-be acquirers—not money, but granular insight and on-point experience.
Charlie Gifford and I talk about this dynamic often on our Middle Market Musings podcast.
The main point of this article is that the use of ESG objectives by investors is not depressing returns—not because the approach is compatible with return optimization, but because many private investors who say they are doing it, aren’t.
The subject itself is so distasteful to many market-oriented investment professionals, it was tougher than I thought getting this into print. John McNulty, the publisher of PEP Digest, noted that he’d avoided any mention of ESG for the past 16 years. He agreed to post this once he understood my perspective, but it was a bit like writing an article titled, “Ten Signs You Probably Don’t Have Dandruff.” The news is good, but who wants the reminder?
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