The trending private equity investment sectors for August 2017 are highlighted below with a few example transactions.

We recently interviewed Carrie DiLauro, Director of Operations at Hamilton Robinson Capital Partners, a lower middle market private equity firm located in Stamford, CT. Carrie shared her thoughts and her firm’s strategies for generating deal flow, navigating higher valuation multiples, creating value and building businesses to weather the storm of macroeconomic or industry specific downturns.

The text below are Carrie’s comments, organized by topic.

We reviewed private equity portfolio acquisitions over the last 12 months (September 2016 – August 2017) to determine which firms were most acquisitive and then grouped them by typical deal size. The list below highlights some of the most active firms in each deal size range (Mega, Large, Mid, Small).

People often speak of M&A transaction valuations in multiples of EBITDA because EBITDA is a proxy for cash flow… and cash flow is the fundamental driving force of business valuation (expected future cash flow, that is).

People knowledgeable about a particular industry likely have a decent idea of the typical EBTIDA multiples for M&A transactions in that space. However, EBITDA multiples are a short cut in our vernacular when we speak about corporate valuation. It’s a derivative of proper valuation methodologies, not a valuation methodology itself. Proper valuation methodologies are based on projected future cash flows and EBITDA isn’t necessarily equal to cash flow.

The Difference between EBITDA and Cash Flow

Different types of businesses require different amounts of working capital. For companies that require a lot of working capital, the exact amount of working capital to convey to in an M&A transaction can be a significant negotiation point. Below, I discuss working capital and how it typically conveys in an M&A transaction.

A successful senior-level investment banker possesses a unique blend of skills. They are technically capable and good at leadership, management, sales and building relationships within their target industry. Great bankers are also effective communicators, succinct in their writing and articulate in their speech. The best bankers are also diplomatic and personable. It’s an unusually wide range of skills to master.

The trending private equity investment sectors for July 2017 are highlighted below with a few example transactions.

On occasion, corporate CEOs ask if we can help find the best investment bank to represent them in either a capital raise, recapitalization or exit.

In an M&A transaction, it’s important to have the right banker on your team to maximize your desired outcome and to ensure a smooth process. So, what should you look for?

Since founding the company, we have been fanatical about data quality. Perhaps it’s the engineering background or my time at a bulge bracket investment bank where perfection was expected. Either way, offering quality solutions with excellent customer support is built into the ethos of PEI.

One method we use to track quality is by measuring both the average age and the oldest update for every data set. I have provide some metrics below to illustrate:

Data Quality Stats

• Private Equity – Firms
  • 3,300 firms
  • Average aging:   11 days
  • Oldest update:  90 days

• Private Equity – Executives
  • 37,800 executives
  • Average aging:   19 days
  • Oldest update:  90 days

• Private Equity – Portfolio Companies
  • 73,000 companies
  • Average aging:   21 days
  • Oldest update:  90 days

This means that our internal research team verifies, validates and/or updates all 73,000 companies roughly every 3 weeks! Further, every portfolio companies has been verified for accuracy within the last 90 days.

How do we keep up with all the data, at that pace? While there is definitely some secret sauce in how we have intentionally built smart systems, technology & processes and assembled a great team to make it happen, frankly, to a large degree, it just a lot of hard work and attention to detail.

The trending private equity investment sectors for the first half of 2017 are highlighted below with a few examples of the acquisitive firms for each sector.