Founders’ Middle Market Focus
BIRMINGHAM, Ala. (March 5, 2014) – The ongoing debate about how to stimulate and sustain the economic recovery has focused around small business and large multinational corporations. Despite being out of the spotlight, middle market companies have and continue to lead the post-recession progress. Middle market companies, defined as having revenue between $10 million and $1 billion, account for a third of private sector GDP and jobs, and according to the National Center of The Middle Market, the segment grew five times faster than the S&P 500 in 2013. Middle market executives remain bullish, projecting 4.3 percent revenue growth in 2014.
Founders’ focuses on advising middle market companies in merger, acquisition and corporate finance transactions, and can attest to the segment’s growth. Since 2012, Founders principals served as advisors on twelve transactions, eight of which involved middle market companies with a total enterprise value of over $238 million. Founders’ principals advised clients across a variety of industries including oil & gas, digital media, software, and healthcare, and across a range of transactions from recapitalizations to management buyouts. “We’ve had a busy couple of years assisting middle market clients and they are all are experiencing healthy growth,” said managing partner Duane Donner. “Although largely ignored in the economic recovery discussion, the value being created in the middle market is not lost on institutional investors.”
Private equity firms raised $217 billion in 2013, the highest amount since 2008 according to DJX LP Source, a research unit of Private Equity Analyst publisher Dow Jones & Co. They also sold a record $120 billion of investments according to estimates by Cambridge Associates, LLC. “The uptick in capital is good news for institutional grade companies wanting to sell or bring on an equity partner,” says Wesley Legg, Founders’ chief operating officer, “because it creates more competition for attractive targets, which results in higher valuations. This is also causing private equity to hunt for deals in the lower middle market, and raise funds with that specific mandate.” According to Mergermarket, US middle market M&A value was $210.1 billion, 23.5 percent of the US total.
The National Center for the Middle Market, a collaborative effort of GE Capital and Ohio State University, estimates there are 200,000 middle market companies in the United States, and while they only account for an estimated 3 percent of all businesses, they provide as many jobs, and generate more revenue than the 5.8 million small businesses. Most of those middle market companies are concentrated at the lower end of the revenue range, with almost 80 percent having revenue of $10 to $50 million. “Middle market companies are small in number, but pack a powerful economic punch,” says Zane Tarence, Founders Technology Practice managing director. “We’re passionate about serving this important segment of our economy.”