Selling a Business Today: PEGs
18 October 2021: Selling a Business/PEGs
If you’re selling a business in the current environment, business brokers – and even business owners that think they can do it themselves – should pay special attention to PEGs.
What’s the Definition of a PEG?
According to Investopedia.com,“(PEGs) manage investment capital obtained from institutional investors or high net worth individuals to acquire equity ownership of companies through a variety of strategies, including leveraged buyouts and venture capital. Private equity firms operate with long-term investment horizons, typically five to seven years.
“After obtaining an equity interest in a company, the private equity firm looks to eventually profit through either selling the company outright or through an initial public offering (IPO). When especially large investments are required, these firms often partner with other private equity firms to raise the necessary capital and to reduce their risk. Most firms specialize in one or more industries or investment strategies where they have particular expertise.”
Our course, “Learn How to Value and SUCCESSFULLY Sell Businesses“, teaches you how to value and sell businesses.
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Some of the PEGs that contact us are looking for niche businesses with minimums of revenue and adjusted net earnings as low as $1.5 million and $250,000 respectively.PEGs Are Flush

We’ve launched a coaching program specifically tailored to Realtors that want to sell businesses, business owners and to anyone that wants to become a business broker.
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So, where’s all that money coming from? Savings is one area. But more specifically, retirement accounts; especially for mid-level investors. Why retirement accounts? Well, as infamous bank robber Willie Sutton replied when asked why he robbed banks, “That’s where the money is.” Starting with a pop of 250 points the day after Donald Trump was elected – when it closed at 18,589 – the Dow Jones Industrial Average is motoring past 35,700 as I type this; a gain of 92% in less than five years. Investors are borrowing against their accounts and investing in PEGs (and in real estate). The markets are awash with cash. This, of course, makes it a good time to sell a business. The relatively recent advent of smaller PEGs is a significant boon to owners of smaller businesses and particularly to the professional business brokers that represent them.

The Bottom Line
If you’re selling a business – or even thinking about selling a business – now is arguably one of the best times in many years to realize the highest value for that business; the covid shutdowns and the (apparently lessening) threat that the current U.S. administration will succeed in pushing capital gains taxes up to thin oxygen levels are fading into the proverbial rear view mirror. PEGs are serious buyers. Neither the seller nor the broker need worry about the ability of a PEG to get financed. PEGs have the dough and need to invest it. When selling a business to a PEG, are there concerns that must be considered? Yes, there are and we’ll address some of them in next week’s post. But the bottom line here is that PEGs are serious, well-capitalized buyers of nearly any business in the Lower Middle Market. If you’re a business broker, you’d be wise to target the appropriate ones for any such business you’re engaged to sell. If you have any questions or comments on this topic – or any topic related to business – I’d like to hear from you. Put them in the comments box below. Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast.Searching
This week’s “Searching” item comes from a small private equity group looking for a U.S.-based Industrial Services (i.e. repair and replace, calibration, maintenance, equipment monitoring) with discretionary earnings of between $1 million and $5 million. If any of you know of something that might fit, please let me know.I’ll be back with you again next Monday. In the meantime, I hope you have a safe and profitable week.
Joe

The author is the founder of Worldwide Business Brokers and holds a certification from the International Business Brokers Association (IBBA) as a Certified Business Intermediary (CBI) of which there are fewer than 1,000 in the world. He can be reached at joe@WorldwideBusinessBlog.com