Sign In

Peter Lehrman

Chief Executive Officer at Axial

Highlights

Jul 22 · linkedin

It used to be that private equity firms could buy a private business "right", lever it, and not do not much else. And that would often beat the S&P materially.

The 1990s and 2000s were largely like this it seems ...

The path to outperformance in the 2020s is markedly different, and private equity firms are re-designing themselves accordingly:

  • Talent sourcing for PortCos is coming in-house in new ways

  • Sourcing is coming in house, with both full time BD and operator-led sourcing models

  • Portfolio Growth Strategy is coming in-house with specialization

Here to tell you about this is Thomas B., who is refreshingly forthcoming about how SBJ Capital is building their firm differently in the modern PE era.

No generalization is ever perfect, but Private Equity seems to have come a long way from it's "buy cheap, lever up, and cut costs" origins.

Enjoy this latest conversation on the Masters in Small Business M&A pod...

May 17 · linkedin

EtA and Search funds (self-funded and traditional) will be consistently rivaling LMM PE funds and strategic buyers as the buyer of choice within 3-5 years.

These acquirer types aren’t acquiring “below the PE radar” businesses anymore. That’s simply an outdated narrative. They are regularly buying $10-$40M lower middle market businesses.

Here are 3 fresh data points that are giving me this glimpse into the future of small business acquisitions and ownership:

Example 1: IT Services MSP serving regulated entities ~$8M revenue in ‘23 $1.9M EBIT in ‘23 ~$9M revenue in ‘24 ~$2.6M EBIT in ‘24

Sold to a searcher (MBA grad on his second lap as a search fund CEO). Sourced via Axial. The search fund outmaneuvered 30+ independent sponsors, 20+ committed capital PE funds, 10+ family offices and 4 strategics on this deal. See image below breaking down buyside demand by buyer type for this acquisition (data source: Axial platform)

Example 2: Retail Health SaaS for patient acquisition ~$8M revenue ~$3M EBIT 90% 3-yr EBIT CAGR

Sold to a traditional search fund for <6X EBIT (mid-career MBA, 1st time CEO). Directly sourced off market.

Example 3: Distributor of Police, Fire, and Ambulance products

$15M+ revenue in ‘22 $2.8M EBITDA in ‘22 $16.4M revenue LTM $3M EBITDA LTM

Sold to a self-funded searcher. Sourced via Axial. Competition on this deal included 15+ individual sponsors, 6 PE funds, 6 family offices, and 2 strategic buyers.

Historically, PE and Strategics maintained a “symbiotic” relationship with EtA and Search. EtA would buy sub-$2M EBITDA businesses, grow them to “LMM PE worthy” status, and then PE/Strategics would take them out. It's not such a black and white dynamic anymore.

Brokers and M&A Advisors need to take this buyer category seriously, and PE and strategics need to continue to advance their differentiation strategies.

EtA is maturing, the number of impressive operator acquirers is increasing, and LP capital is flowing.

More data on closed deals can be found via the link in the comments.

Private Equity Firms Will Be More Active in 2016, Predicts Axial CEO Peter Lehrman - Mergers & Acquisitions
Private Equity Firms Will Be More Active in 2016, Predicts Axial CEO Peter Lehrman - Mergers & Acqui
Sep 17 · FinSMEs
Axial, Interview with CEO Peter Lehrman - FinSMEs
Axial, Interview with CEO Peter Lehrman - FinSMEs

Related Questions

What inspired Peter Lehrman to start Axial?
How did Peter Lehrman's experience at Gerson Lehrman Group influence his vision for Axial?
What challenges did Peter Lehrman face when founding Axial?
How has Axial evolved since its inception?
What are Peter Lehrman's future plans for Axial?
Peter Lehrman
Add to my network

Experience

Chief Executive Officer at Axial

Education

Brunswick School
The Buckley School, Nyc
Buckley School
Master Of Business Administration, Masters In Entrepreneurial Studies, Entrepreneurship, Stanford University Graduate School Of Business
Bachelors, Bachelor Of Arts, Bachelor Of Arts In Business Administration, University Of Virginia

Location

New York, New York, United States