For a long, long time private equity received far more than its fair share of negative publicity. We see this with nearly every M&A summit we host – Business owners predominately shun PE buyers because of the negative view that equity firms acquire businesses to either consolidate (cut jobs), reduce expenses (cut jobs) and/or break companies up and sell the pieces.
Certainly history is littered with the scenarios described above. However, since mega PE transactions get nearly all the press, it is clear that the view of these professional buyers is very skewed.
In fact, we have found over the years that private equity firms that specialize in acquiring middle-market (and even lower middle-market) companies have a different game plan in mind. Rather than buy and break, they buy and build. Instead of simply using financial engineering to reduce costs/overhead, they bring managerial skills, marketing and sales experience, and operational expertise to take a smaller company (when combined with an existing platform company) from sales and profits of X to X2.