One of the buzzwords permeating the PE sector is the search for PLATFORMS.
For the non-PE among us, a Platform is a sizeable business that can form the core of a PE firm’s strategy to grow in a targeted area. The PE firm will aim to find a Platform business and then seek to grow that business with additional capital and acquisitions.
Platforms are important to PE because they commonly provide the central leadership and services that attract other firms to be part of the PE firm’s strategy. In this way, the Platform gives the PE firm credibility to investors and bolt-on acquisitions that the PE firm can get deals done and that they are good to work with post-transaction.
Are you a Platform?
The reason we ask “are you a Platform” is that PE firms are also willing to pay higher multiples for Platform businesses that strategic buyers will pay for the same business, and certainly more than for bolt-on acquisitions.
So if you are thinking about selling your firm and you think:
- you have good leadership
- you have a strong market reputation
- you have reliable revenues and future prospects
- you have excellent market opportunities but need bolt-on acquisitions
then your firm may be a Platform and may be much better off talking to PE as well as strategic buyers.
The tricky aspect of being a potential Platform, however, is not all PE firms are interested in the same potential Platform companies. PE firms are typically looking at different sectors, varying business model, alternative leadership strategies, etc. So if you want to be a Platform you need to contact the right PE firm to fit your company at the right time.
What PE Firms are Seeking
PE firms are looking for Platform businesses across the US, Canada, Asia and Australia in IT Services, SaaS, Engineering Services, Health Care, HR Contractor Services and Education Services.
Often, a PE firm will seek out a strong market leader in a very specific niche, with the expectation that the business has a sustainable premium on earnings. We know of firms interested in services such as radiology, health IT, building products and data recovery businesses, typically looking for an enterprise value upwards of $40 million with an EBITDA over $5 million.
At Eaton Square, we focus on understanding what different PE companies are looking for so that we can link you to the right buyers. Importantly for the seller, many PE firms now operate internationally and so it is important for sellers to have international reach to maximise their exit valuations.
If you would like to discuss your strategic opportunities, please contact us at Eaton Square for a confidential discussion.
Eaton Square a cross-border M&A and capital services firm focused on services, technology and growth companies in the US, Canada, Australia, Asia and Europe.