Middle Market - Private Equity - Digital Analytics

 

This Middle Market process is unique to Transworld Business Advisors of Indiana allowing Indiana business owners access to the national Private Equity market.  This is a possibility for some businesses with in excess of $1 million in net income to attract the attention of PE firms.

For companies headquartered in the Midwest, the multiples aren’t what they are on the coasts where multiples can be dramatically higher than here in Indiana.  In Indiana, a business may be conservatively valued at 2.5X to 4X and everyone locally - bankers, CPAs, and private equity will all agree with that valuation.

But on the coasts, there are PE firms sitting on piles of cash and they are willing to pay higher multiples to buy undervalued Midwest companies.

How do you reach them?  How do you get your business’ memorandum in front of a PE Analyst who says your business should get a 5X or 8X multiple?

Transworld’s marketing platform is ideal for reaching the national PE market.  Our process allow us to reach multiple buyers in a short period of time and managing multiple potential offers for our client.  Advertising a business for sale requires confidentiality so to not damage the business.  Maintaining client company confidentiality of identity and information is the greatest value that Transworld Advisors offer their clients. 

The next greatest values, especially to Middle Market corporate clients, would be negotiating the right deal structure and leveraging the best sale price.  

Here is an example of our Middle Market Marketing Process leveraging the national private equity community for an Indianapolis digital marketing company in 2022.

Phase One - Preparing the Business for Sale (January - February)

•Complete valuation assessment & report

•Business & Financial Data Gathering

•Develop marketing package 

Phase Two - Middle Market Marketing Process (March - May)

•Target marketing to 4,000 private equity firms in US

•Confidential memorandum review with 50+ NDA respondents

•Indication Of Interest (IOI) Schedule & Deadline

•Offer & Terms Selection

Phase Three - Due Diligence & Closing (June - July)

•Schedule and Plan 

•Virtual Data Room for Business & Financial Data

•Purchase Agreement

•Close

For this client, we had Transworld’s Fort Lauderdale headquarters send out initial inquiries to over 4,000 private equity firms in the US in mid February.

Over 50 respondents completed a Non-Disclosure Agreement and received the confidential information memorandum about the business.  Those respondents were given an Indication Of Interest (IOI) schedule for Q&A and deadline for a letter outlining basic details of an offer & proposed purchase price.

We received IOIs ranging in proposed purchase price from below our valuation to more than 100% above our valuation “list price”.   After reviewing IOIs, we advised our client to move forward with an East coast private equity buyer with an extensive background in our client’s industry at a sale price 40% above our “list price”.

Through our negotiation of the deal structure with the private equity firm, we were able to reach an agreement for 85% of the sale price to be paid at closing.