Fall 2014 issue of Horizons

Bottom line, there is no longer a one-size fits all approach for private equity, especially in the middle and lower- middle market. The opportunity to partner with the right firm may represent a significant opportunity for

In addition to fund structure, middle and lower-middle market PEGs have a significant interest in partnering with an existing management team. Most of these PEGs have a high degree of interest in allowing the owner to roll-over equity, which can create alignment of financial interests such that the original owner has the opportunity to participate in a second sale event, the proverbial “second bite of the apple.” Oftentimes, that second bite is larger than the first. Allowing a PEG to take a controlling interest in your business can allow you to realize some of your business’ value while also giving you the risk tolerance to pursue certain aggressive business objectives that you may not have otherwise pursued when you were the sole owner. This can be tremendously freeing for a business owner. One of the drawbacks is that there is now another owner who has input into business decisions. This can be mitigated by thoroughly vetting the PEG that buys a controlling stake in your company. There are also PEGs that will do minority interest deals. This can be a great option if you are looking for additional capital. Additionally, partnering with this type of PEG can give you additional resources and connections that may enable you to accelerate the growth of your business.

you as the business owner to take some chips off the table while maintaining significant ownership in your business to allow for that lucrative second bite. As you are thinking about your own strategic growth, general liquidity or exit plan, private equity and all of its various forms should be considered. Private equity involvement in your business can give you the risk appetite to pursue those opportunities which you may not have felt comfortable pursuing alone, potentially adding significant value to your business. When the time is right for you to pursue your exit and liquidity options, it’s important to take a look at all of your options to give yourself the best possibility of achieving your desired result.

RubinBrown’s Private Equity Services Group RubinBrown offers private equity firms and their portfolio companies an integrated suite of business services aligned across the entire private equity life cycle.

Ben Barnes, CPA Partner-In-Charge Private Equity Services Group 314.678.3531 ben.barnes@rubinbrown.com

Jeff Sackman, CPA, CGMA Partner & Vice Chair Private Equity Services Group 314.290.3406 jeff.sackman@rubinbrown.com

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