As mentioned in Chapter 1, the two major players in the private capital markets are strategic buyers (strategics) and private equity groups (PEGs). Strategics are corporate buyers typically seeking to acquire more than just financial results. For smaller strategics that are themselves middle market companies, an acquisition may mean a merger of equals or the purchase of a larger business. For larger strategics, including S&P 500–sized public companies, an acquisition of a middle market business is likely part of a series of transactions within an overall strategic initiative. This is of particular interest given the increased level of activity in the middle market by larger strategic buyers as they seek to deploy the record amounts of capital currently stored on their balance sheets. Teams within larger strategic buyers that lead external initiatives, including acquisitions and divestitures, are generally referred to as corporate development teams. In the context of this handbook, the focus on corporate development is about their acquisitions.
For middle market M&A advisors, understanding the role and motivations of those in corporate development can be valuable in navigating a sell-side engagement. Conversely, corporate development professionals active in buy-side initiatives in the middle market can benefit from understanding the process and nuances of acquiring and integrating privately held businesses; there are distinct differences between ...