This article is brought to you by Duane Morris.
As extensively covered and analyzed as the private equity industry has been in the last few years, that spotlight has been directed, on the regulatory and policy sides, at the debate on issues surrounding potential systemic risks to the financial system, registration with the SEC and taxation; and on the media side to the high-living ways sported by the partners of the global buyout behemoths, some of them now public companies involved in multiple lines of the financial services business.
What has been less well-reported and possibly less understood is the core competency that actually builds value in middle-market private equity—the mechanics and practices of platform acquisitions and add-on strategies. What are the optimal approaches to the business of building EBITDA that result in multiple expansions? What are the pitfalls and triggers that drive go or no-go decisions? How do you spot the bêtes noires hiding in the bushes before they spring out to bite you? And how do you accomplish all this within the five-year window that comprises the timeframe for the large majority of sponsored deals?
It is that gap in the information marketplace that prompted the thinking underlying Duane Morris’ thesis for this issue of PE Connections in the Middle Market, framed by its PE Forum event held in Boston last fall. To examine the issues surrounding this fundamental process for private equity, Duane Morris asked to the table some of the most prominent and active operators in the middle market, joined by a strategic acquirer versed in horizontal build-out from the corporate perspective. Between them, these commentators—Jay Jester of Audax Private Equity, Marty Mannion of Summit Partners, Tom Wippman of Sterling Partners and Phil Mazzini, former head of H&R Block Retail—have engineered thousands of transactions designed specifically to drive incremental value into platform companies. Each brought with him his unique views and experiences in the business, but in total, the audience took away a comprehensive understanding of the essential alchemy of private equity—how 1 plus 1 can equal 3. This is the definition of “inside baseball”— sometimes counter-intuitive to the received wisdom in the industry.