Deal Killers and Deal Makers: A Private Equity Perspective

Topics

About the Episode

Understanding what private equity firms look for in a potential acquisition can help you prepare your company for a successful sale. Nick McLean offers insights into what an owner can do to make a middle-market company attractive to PE firms and how to address the five most common deal killers that can derail a transaction. From customer concentration to off-balance sheet liabilities, cyclicality, business size, and creative accounting, Nick has expert advice to mitigate risks and maximize value.

As an owner, you have to make sure you are doing everything you can to increase the attractiveness of your business to whomever the future owner might be.”

Nick McLean

What You’ll Learn

  • Major Deal Killers: A look at the risks private equity firms consider, such as customer concentration, off-balance sheet liabilities, cyclicality, business size, and creative accounting.
  • Address Risks: Tips on how to proactively address risks and liabilities like customer concentration through sales and marketing strategies to diversify and grow the business.
  • Exit Planning: Hear why it’s important to begin preparing for your exit almost as soon as you start your company. 
  • Private Equity Firms: Gain insight into private equity fund sizes, typical deal sizes, and requirements for platform vs. bolt-on acquisitions.

Topics Covered

What is the most common deal killer for a private equity investor? [3:38]
What can owners do to mitigate the risk of high customer concentration? [9:44]
How can off-balance sheet liabilities be a deal killer? [14:08] 
How can a seller be protected against liabilities or claims that come up after the sale? [23:50]
What actions can an owner take to address the threat of cyclicality as a deal killer? [26:35]
Is the size of a business a deal killer for some potential buyers? [34:54]
What size requirements do PE firms have for companies they will consider buying? [38:25]
How can “creative” accounting become a deal killer? [46:38]

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Meet Our Guest

Nick McLean

Nick McLean

Founder, Four Pillars Investors | Kansas City, Missouri

Nick is a Co-Founder and Partner at Four Pillars, a PE firm that partners with entrepreneurs and investors to purchase and operate lower middle-market businesses with untapped potential for growth. He has over 15 years of experience as a private equity investor and focuses on fundraising, deal origination, and execution. Nick also runs a popular YouTube channel with over 250K views, where he regularly shares knowledge about the ins and outs of private equity investments.

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