Perspectives
Worth Investment Group buys lower-middle-market manufacturers and distributors directly from their owners and holds them for the long term. Many of the conversations that shape our thinking happen with owners, advisors and other buyers. We share these views because owners deserve plain answers before one of the biggest decisions of their lives.
Worth Noting
Worth Noting is my monthly note on the lower middle market. It has run for more than 75 issues and is now also published as a newsletter on LinkedIn. Each month it looks at what is happening in the market and what it means for owners of businesses like the ones we own.
Issue 75: “The barbell tips down”
“In July we described a barbell market: capital piling into megadeals at the top and into small add-ons at the bottom, with a thin, quiet middle. Three months later the shape still holds, but the weight has shifted.”Read Issue 75 on LinkedIn →
Short takes
Owner succession
A generation of business owners is getting ready to step back, and many have not started the succession conversation. Often it is because it feels like admitting they are done. The owners who start early get to pick a successor on values and give employees and customers continuity. The owners who wait usually end up with fewer options, or none. Starting the conversation is not the same as deciding to sell. It is how you keep the choice yours.
Join the conversation on LinkedIn →Who you sell to matters
Many owners care as much about who carries on their name and their people as about price. So ask every buyer one plain question: is there a date by which you need to sell my company? A fund with a five-to-seven-year clock and a permanent owner can offer the same price and mean very different things for your people and your name on the building. You should get a plain answer.
Join the conversation on LinkedIn →Compare the checks, not the multiples
The headline multiple is the number people repeat at dinner. Cash at close, the size of the roll and the terms on the note are what owners actually live with. In the lower middle market, a clean structure at a slightly lower number often beats the bigger bid with strings attached. If you roll equity into a permanent owner, agree up front on how and when that stake can turn into cash. Good long-term buyers should welcome that conversation.
Join the conversation on LinkedIn →Staying out of auctions
Larger private equity firms are moving into the lower middle market, and crowded auctions push prices up. We don’t think the answer is to bid harder in auctions. It is to stay out of them. We look to meet owners before a banker does and offer what an auction can’t: certainty and a long hold.
Join the conversation on LinkedIn →What happens after close
In the lower middle market, the edge is less about the entry multiple and more about what happens after close. Many of these are great businesses that simply never had to professionalize. The work is real reporting, finance and systems, a second layer of management and a plan for the next generation of leadership. That work takes years. That is why the length of the hold matters as much as the entry.
Join the conversation on LinkedIn →