Interview with Peter Lehrman – CEO of AxialMarket

Posted on February 4, 2011

When I first started in the M&A business there were a few hundred private equity firms in the U. S. and virtually none overseas.  Getting to know them was relatively easy.  Today there are literally thousands of PE firms in the U. S., hundreds, if not thousands  in Europe, and a rapidly growing complement of Asian and middle eastern PE firms focused on the emerging market countries. Picking the perfect candidate to acquire or invest in any particular lower middle market company has become an overwhelming challenge for intermediaries focused on a good ‘ole boy Rolodex approach to the M&A business.

AxialMarket (www.axialmarket.com) was created to fill that gap.  Axial provides an online marketplace populated by more than 1500 intermediary firms and thousands of PE firms, strategic buyers, family offices, venture capitalists and other qualified private market participants who use Axial’s controlled, trusted marketplace to confidentially source and manage a pipeline of transaction opportunities across the private markets.  Pre-qualified intermediaries have the opportunity to post blind listings of companies for sale or needing financing or recapitalization.  On the buyside PE firms as well as strategic buyers pay monthly subscription fees to have access to thousands of qualified listings.  Axial uses its sophisticated SaaS database to pre-select those buyside firms most likely to be interested in a particular deal.  These firms are then presented to the intermediary for consideration and only approved buyers are permitted to see the deal summaries.  The bottom line is that deals are getting down; more than three thousand business sales, including companies with revenues from $1 million to $400 million have been completed utilizing Axial listings since its inception.

Today we are pleased to have with us Peter Lehrman, the driving force behind AxialMarket.  Highlights of Peter’s interview (4 1/2 minutes) as well as the full interview (about 30 … read the rest

M&A Update Q4 2010

Posted on January 1, 2011

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Global M&A volume (closings) has recovered moderately from a low of $1.8 Trillion in 2009 or about half the market peak of $3.6 Trillion in 2007. We estimate 2010 volume around $2.3 Trillion, up around 28% from 2009.

Source Capital IQ; *2010 Focus Investment Banking Estimate

In the U. S. private equity activity continues to increase, with the likelihood that for the full year 2010 $ invested by PE firms will exceed $100 billion or approximately double the 2009 trough. This number is still down approximately 85% from the 2007 peak.

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Source Pitchbook

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Focus has seen a good recovery in M&A activity in 2010, with total closed M&A transactions expected at 12 for the year compared to 8 in 2009. More important, for consistently profitable companies in favored sectors (e.g. IT services and software) we have witnessed pricing multiples reminiscent of those at the peak. Weak companies battered by the recession on the other hand have had some difficulty getting traction in this market.

Recent activity leads us to believe that the recovery in deal activity will continue into 2011 and may gain strength. We have seen indications that PE firms, essentially absent from the market in 2009, are becoming more aggressive in their activities and more willing to look at firms outside the most popular sectors. This is driven in part by the record level of “dry powder” in the hands of PE firms, approaching $500 billion. At some point this money must be invested or given back to the limited partners.

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Source: Pitchbook

Additionally we see continued strength among strategic buyers that have become quite active in a number of industries. With revenues stagnant in many cases, these firms must look to acquisitions to create the growth expected by equity market investors.

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Proposed Changes to Estate and Gift Tax – A Wakup Call for Business Owners

Posted on July 29, 2009

Congress and the President appear dead set on creating lasting damage to independent business through ill conceived tax policies. The latest reports show that Congress is planning to solve our health care crisis at the expense of the “rich” with family incomes over $350,000 by imposing a new surtax of as much as 8-9% in addition to other tax increases already in the Obama budget. According to a 2007 Treasury study reported by the Wall St. Journal, fifty percent (50%) of the incomes affected by the new taxes will be generated by the sole proprietorships and Sub-S corporations which are responsible for creating 70+% of the new jobs in the United States.

If anything like the proposed new taxes comes to pass, it may be time for business owners to shift some wealth back to their tax planners and to dust off C-Corporations and tax shelters as areas of strong interest. When considering their options, business owners should take into account the negative (double taxation) impact of tying up their wealth in taxable C-Corps. In our M&A practice, we find that structuring private businesses as C corporations is one of the major impediments to successful exit transactions. Planned increases in the capital gains taxes are certain to make things even worse. For many business owners the best answer may well be to sell now before these overreaching tax law changes make it infinitely harder to realize fair value from their many years of hard work.

Less well publicized are various tax proposals aimed at “reforming” the estate tax laws. In addition to the planned return of the wealth transfer tax following the expiration of the Bush tax cuts, the administration has several surprises in store which could have a major detrimental impact on the ability of business owners to pass ownership … read the rest

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