I worked in Bain & Co (not Bain Capitals) Private Equity practice the last summer and got to work on 3 deals the first was a PE firm taking a 250-500 Million public company private, the second was a more pure play PE deal, and the last was an M&A deal of a public company buying assets of another public company.
The first Public to Private deal was quite interesting since there was actually a meaningful ability for this public company to cut costs once acquired solely from no longer having to maintain SEC compliance.
The M&A deal I thought was quite interesting as the firm that was selling the assets saw there value diminish greatly with the rising costs of capital but the acquiring firm was going to purchase them using all cash, and would supposedly be able to see further benefit from realizing synergies. I think this environment like you mentioned breaks many PE firms models but actually provides a unique opportunity for consolidation in firms that have significant capital reserves.
Based on your last paragraph, if you are willing to share, are you going to try and take private multiple public companies and consolidate them, or just looking to take one private? Cause if it’s the latter I think there is an interesting opportunity that I realized after attending LD Micro. Many of the good businesses at LD Micro had good products/services and value propositions but lacked expertise in other aspects of the business. Nexgel comes to mind, promising product, supposedly has contracts with medical company’s that will be realized in the next 18 months, but in the meantime has created a direct to consumer line. Majority of his revenue is coming from repeat customers. He has put very limited marketing spend into this line and never considered creating a referral program to allow his devote customers to help him grow his business. To make things even worse his instagram is being following by D1 athletes with large followings because the apparently use his product and the CEO is blatantly unaware. All that to put the point that I think there is a unique incubator opportunity for some of these micro cap firms. For one reason or another do not fit the typical VC mold but would benefit from expertise in running areas of their business outside their core competency. Basically a public company incubator or a consulting firm that generates its revenue through investing in micro-caps and helping them grow.
Not sure if this leads to fruitful discussion or applicable but your commentary made me think of it.
Also this was written on a phone so apologies for any bad grammar.
Hey Ben, interesting piece.
I worked in Bain & Co (not Bain Capitals) Private Equity practice the last summer and got to work on 3 deals the first was a PE firm taking a 250-500 Million public company private, the second was a more pure play PE deal, and the last was an M&A deal of a public company buying assets of another public company.
The first Public to Private deal was quite interesting since there was actually a meaningful ability for this public company to cut costs once acquired solely from no longer having to maintain SEC compliance.
The M&A deal I thought was quite interesting as the firm that was selling the assets saw there value diminish greatly with the rising costs of capital but the acquiring firm was going to purchase them using all cash, and would supposedly be able to see further benefit from realizing synergies. I think this environment like you mentioned breaks many PE firms models but actually provides a unique opportunity for consolidation in firms that have significant capital reserves.
Based on your last paragraph, if you are willing to share, are you going to try and take private multiple public companies and consolidate them, or just looking to take one private? Cause if it’s the latter I think there is an interesting opportunity that I realized after attending LD Micro. Many of the good businesses at LD Micro had good products/services and value propositions but lacked expertise in other aspects of the business. Nexgel comes to mind, promising product, supposedly has contracts with medical company’s that will be realized in the next 18 months, but in the meantime has created a direct to consumer line. Majority of his revenue is coming from repeat customers. He has put very limited marketing spend into this line and never considered creating a referral program to allow his devote customers to help him grow his business. To make things even worse his instagram is being following by D1 athletes with large followings because the apparently use his product and the CEO is blatantly unaware. All that to put the point that I think there is a unique incubator opportunity for some of these micro cap firms. For one reason or another do not fit the typical VC mold but would benefit from expertise in running areas of their business outside their core competency. Basically a public company incubator or a consulting firm that generates its revenue through investing in micro-caps and helping them grow.
Not sure if this leads to fruitful discussion or applicable but your commentary made me think of it.
Also this was written on a phone so apologies for any bad grammar.