Three years ago today the public equity market bottomed after a harrowing fall that slammed the broader financial markets. The first few months of 2009 tested the mettle of nearly all of us who rely on the smooth functioning of markets to provide capital for business owners. Stability has been restored and the private market is both flush and eager to invest. Professional owners of middle market companies are already in full swing taking advantage of opportunities to recapitalize at record prices. Fundamental improvement in several industry sectors has opened the market on a broad basis.
What are professional owners? They are asset managers who invest in private companies for the purpose of building and trading them for profit. They differ from most other private company owners because they have a laser focus on planning and executing to increase value that can be monetized. They concentrate on organizational muscle to strengthen management teams and systems, and then meticulously monitor progress toward the goal of sustainable growth at maximum margins. They come in all shapes and sizes and seek both minority investments as well as control positions. Even the control investors love for sellers to have a piece of the upside.
How about the rest of us? Most businesses under entrepreneurial or family control are at least a little less disciplined for a variety of reasons. The main reason is they don’t expect to be in the market in the near term and they mistakenly think that investors or strategic buyers will overlook their being out of shape. Then some market development or personal priority change motivates the discretionary participant to want their business to be judged as worthy as those of the professional owners. They don’t say it that way; they just expect a premium valuation that is as good as a similar company that has been groomed for maximum value. That is when it is most apparent that the biggest rewards go to those who run their businesses like professional owners.
Why does any of that matter? The stability and maturity that has been achieved in the market for investment in private companies combined with the predictability that is finally in place has opened more alternatives than ever for business owners to raise capital and monetize some or all of their illiquid value. Manageable volatility will continue and of course there are continuing economic and political risks. Nevertheless, conditions are positive and on the uptick; very real opportunities are there if you want to pursue them.
Let’s appreciate that we have survived and have emerged smarter and tougher than most of us were three years ago. Ask yourself whether you have an interest in knowing just what growth financing and liquidity options are available for your business. MidMarket is here to help you take advantage of opportunities you might not even know are waiting for you. In the meantime, today’s anniversary is one that we can all celebrate!