Private equity groups boost merger activity - Dayton Business Journal:

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National and local private equity groups have begunh playing a larger role in mergersand acquisitions, givinf companies another option when selling. These types of firms accounted for 20 percent of all of the mergef and activity in the country last or $3.6 trillion in closed deals, accordingh to Thomas Financial. "They are changing the landscape of mergers and saidJim Sachs, president of . "They are greag sellers for companies that meet criteria such as paying a high multitudwe and having a platform in a niche Sachs said six months ago his firm liste a local manufacturing company for sale on a merger and acquisitions Web site and was inundated with inquiries from privatedequity groups.
Companies that specialize in this type of buyinh focus on finding and investing in nichwe businesses that they can help grow by reorganizatiom and acquisitions to make the business more These type of firms usuallgy raise money fromhigh net-worth individuals or institutiona l investors to buy both privatwe and public companies. Most privats equity groups are interested in growing industries such as healthb care and are beginning to shy away from theautomotivew industry, Sach said.
Jim Butterfield, principal with Atlanta-based , said the main goal of his firm is to help smal companiesthat aren't doing well save jobs by building the business back up and keepinbg as many employees as possible. Most of these types of firms purchase companiee who have high barriersof entry, good managementf teams and the ability to grow in theit industry so investors will get good retur once they are sold.
Riverside focuses on buying small businesses or companies who havea $1 milliojn in cash flow and anywhere from 30 to 50 When equity firms like Riverside acquire companies they make improvementsx to the business such as helping personnek with hiring the right people, creating incentive plans to perform and possible outsourcing in order to get a good return from the company once Firms in this business usually turn around and sell companiese in five years for a highere acquisition price so investors get a highetr return. "We exist specifically to put moneh to work for our investors and give them agood return," Butterfiele said.
Ed Reilly, president of 'xs southwest Ohio district, said private equit y firms are starting to bring some competition forlocalk banks. "They are beginning to be a large liquixd sourceof capital," he said. "Clientss that are being bough t by private equity groupse oftentimes don't have a need for locao banks." -- with stations in the Dayton-area -- was acquired by througnh Washington, D.C.-based Englewood-based TeleSuite Corp. was acquired by Nebraska-based in 2002.
Privatew equity firms may not have a need for the locaol banking market because they use a combination of theirf own capital and large lines of credif which may only be concentrated withlargerr banks, Sachs said. Butterfield said the locak banking market can be used for cash managementr and trust services for these groups which still created a needfor "Companies are going to sell regardlesds of who's going to buy," he Banks could begin to lose businesss when companies sell to strategic buyers who often fold the business into a headquarters creatinv one less customer, Butterfield said.
Strategicd buyers often don't acquire all of a company's assetd and bring in theirf own management group hoping it will drivehighed margins. Butterfield said if the public return on companies becomes tremendous in the near private equity firms may bein trouble. Tom senior vice president with Alpha-based , said the trend of private equituy firms may have runits course. "Th market has been strong for the past 15 or 20 yearas because low quality bonds have been outperformint highquality bonds, but the spreads are goinvg to get tighter making it harder for he said.