Category: Alternative Investments

Alternative Investments, Buying & Selling a Company, Exit Planning

Are Private Equity Groups For You?

Gregory Pearl

In recent decades more and more capital has flowed into the alternative investment category of private equity or Private Equity Groups (PEGs). Maybe because of this higher profile, we get asked repeatedly by business owners in the lower middle market if they can sell to a private equity group. I’ll say this right up front – most likely the answer is no. Private equity investments have traditionally been focused on large companies, the so-called middle market and especially the lower middle market have been ignored. That has changed in recent years as more capital has entered this investment category. Seeking…

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Alternative Investments, Buying & Selling a Company, Exit Planning

Business Unit Divestiture Deal Structure: Whatever It Takes

Gregory Pearl

When a company is looking to divest one of its units, the best acquirer is a strategic buyer with lots of cash. Wait, that seems to be a terrific buyer for almost any type of business! There are other alternatives, of course.  Each approach has its positives and negatives. Private equity firms are often good places to shop a business that is for sale. Assuming that business is large enough and without too many problems.  Private equity firms tend to be more demanding in what they are buying than strategic industry buyers. They are more demanding in their due diligence.…

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Alternative Investments, Decision Making, Exit Planning

Business Unit Divestitures: Unpleasant But Often Necessary

Gregory Pearl

It is common for larger companies to divest units that are underperforming or otherwise do not meet strategic goals. This practice is likely to increase. Whether the M&A market is hot or not, divestitures are a challenging activity requiring strong support from equity stakeholders and management. The divestiture activity should not be treated as an inferior activity to acquisitions. Divestitures have its own set of challenges. Confidentiality needs to be maintained and this may harm both the seller and the buyer. The selling company may not adequately understand what is going on in the unit being sold. For the seller,…

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Alternative Investments, Business Valuation, Culture and Ethics

How Much Is That Investment Worth?

Gregory Pearl

An individual made a $28,000 investment into an oil and gas company.  The majority shareholder was a childhood friend. Ten years later, the company offered to buy out the investor’s approximately 6% ownership in the company for $6.5 million. The investor accepted the offer and thought he made a phenomenal return. But things are not always as they seem. Two years later, the company was sold for $2.6 billion. Of course, the investor sued for fraud during the time the offer was extended and accepted. A jury found in favor of the investor with a judgment for the investor of…

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Alternative Investments, Decision Making

Why North America?

Gregory Pearl

For companies located outside of the United States with plans to grow, entering the U.S. market is an important part of any long term business strategy. For American firms, the domestic market can offer substantial opportunities. North America should probably be the first market of choice, for most firms. The United States is probably the most dynamic and possibly lucrative market in the world. In fact, combined with Canada and Mexico, the region will possibly be the main economic driver of the world in the 21st century. Despite the back and forth and the re-negotiation of NAFTA, these three are…

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Alternative Investments, Decision Making

The Challenge of Strategic Market Entry

Gregory Pearl

Companies are expanding into new geographic markets to achieve growth now more than ever. For a business that wants to grow and achieve substantial scale, globalization has made conducting business on an international basis a necessity. The need to reach beyond a company’s traditional markets into the global marketplace is an essential activity for growth. Besides looking at revenue growth,  sometimes operations need to be located overseas to realize the necessary cost advantages to be successful at home.  It really is no longer a choice. This is a process containing risk. While any new market entry carries the risk of…

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Alternative Investments, Decision Making

So You Want To Start A Business: Part 2 – Know The Business

Gregory Pearl

This is a continuation of my last post. In Part 2, I discuss in general terms the positive characteristics of the proposed business you should consider. There have been libraries written on what makes a startup successful.  I will not repeat any of that here, as it would take a river of ink (pixels). Instead here are some items I have personally found useful to consider. This discussion is definitely not comprehensive!  Just things to consider. Why are you trying to start this particular business? Maybe you have a killer, versatile skill set that would make any entrepreneur jealous. And…

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