Big Banks Compete For Small Deals – Essential Conclusions for Entrepreneurs

Big Banks Compete For Small Deals – Essential Conclusions for Entrepreneurs

There was a fascinating article in the WSJ today which is worth summarizing for business owners.

The article was valuable for entrepreneurs because it brought together some key statistics you should be aware of, and I’ve added a few more to add value and context. The storyline of big banks moving down-market to advise on sub $1 billion deals is not new. However, this current strategic move by JPMorgan Chase and Goldman Sachs is backed up by a switch in significant resources to create a sustainable fee stream. But the really interesting stuff was the statistics shared in the article:

  1. In the US last year there were 135 deals valued at over $2 billion. Source FactSet.
  2. In the US last year there were just under 10,00 deals valued at under $2 billion (of which 7800 where terms were not disclosed). Source FactSet.
  3. The # of private companies owned by PE firms has jumped from below 2000 in 2000 to around 7800 today. These types of private companies have only one mission in life – scale and sell out for top dollar.
  4. Finally, for context, there are just under 5.7 million companies in the US who run a payroll.
  5. Only 100,000 companies employ 100 people or more.

Scaling and selling your business for a meaningful retirement package is much rarer than you think. Every year hundreds of thousands of business try and fail to sell. As you can see from the above, in one year there are only around 10,000 deals done. Previous research reports over the years show similar statistics of around 8000 deals per year valued at over $10 million.

Conclusion: Building businesses buyers want to buy (for an attractive sum) is a much more challenging task than entrepreneurs realize. However there is a way to work on the right stuff and transform your odds. The PE owned businesses know how to do it with an alarming success rate. But they’re not going to share that secret sauce with you. But we will! Scaling a private company to give you the option of selling requires a rare combination of an insightful strategy with relentless execution.

Reach out to hear how our partners have been working inside businesses as operators for over 30 years to create businesses that have exited for premium valuations.

Ian@TPPBoston.com

Further reading: Valuation Gaps & How to Close them – An Operators Guide

 

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