In the post recession period, big deals are hardly seen in the market. Instead, companies are now switching to deals that are characterized by lower figures. Initially, businesses tried their luck in the middle market and now they have moved to the lower middle market, which appears to be quite attractive. An indication of this is the fact that a reputed middle market firm received an award in recognition of its accomplishment and has now signed an agreement that is dedicated to providing support to those companies which have values less than $250 million.
A partner at a reputed private equity firm states that though the lower middle market seems appealing, there are plenty of concerns that have to be addressed such as the primary differences between the lower middle market and the middle market, and the challenges that can arise in the processing of deals and the prerequisites of success.
In terms of transactions, a middle market includes all those deals that are less than a billion dollars. Most acquisitions are concentrated in the range between $250 million and $500 million. As for the lower middle market, it comprises of all deals that are between $ 10 million and $250 million.
A recent survey points out that the years to come will see many more transactions in the lower middle market. Even in 2014, this will be prevalent with most of the deals worth a small amount in the entire merger and acquisitions industry. The survey comprises of 1,000 respondents and 77% of these stated that most of the M&A activity will fall below $250 million.
So what do companies need to focus on if they want to succeed in the lower middle market? The primary focal element should be tactical planning, which involves improving operations in some business aspects for a limited period. This concept is different from strategic planning in which long term goals are the primary focus.
Flexibility must also be paid attention to according to as seen in a story of a brand which was experiencing a reduction in sales in an area, after being on top for a notable period of time. Though they could have revamped and re-launched the brand, they just changed the packaging in that area and that was enough to get a market share once more.
Until, planning and flexibility are catered to, deals probably will not be successful.
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