Sizzle sells the steak, but if someone is hungry enough, the sizzle matters less. Today’s cash-flush private equity groups are activefly seeking steak. That is, they are looking for quality deals with solid meat on the bone. In our world that typically translates into companies with large revenues and sizable EBITDA and EBITDA margins. I may not eat my steak cold, but it does not have to sizzle in order to get me up in the morning.
Private equity groups’ (PEGs) demand for good deals, has PEG biz dev managers ignoring the sizzle, but this has typically always been the case.
Private equity firms are often more concerned with capital preservation combined with capital appreciation. Unfortunately, we regularly see hundreds of deals where there is a great deal of hype, but no company history–and worse still–founder history.
I also charge less for boring deals because I value them more.
Some of the best middle-market deals are boring deals. Companies in boring, but still profitable sectors like businesses services, manufacturing, transportation & logistics and real estate.
The latest app or tech may see large spikes in stock valuations and make the front page of the WSJ, but most of the middle market is driven by some very boring deals.
I will let the boredom make me yawn all day long.