I expect to see more carveouts in 2024 as private equity firms selectively prune portfolios and look to return at least some capital to investors. Recent example - Empower Brands (backed by MidOcean Partners) sold Intelligent Office (first acquired in 2019) to United Franchise Group. #peprofitladder #mergersandacquisitions #privateequity
Perfect market timing is difficult to pull off, but excellent preparation and building a valuable business in the first place is much more under your control. Private equity firms are actively seeking high-quality franchise businesses, so it's crucial to have a solid plan in place. Avoid vague improvement ideas and instead, document your strategy, assign accountability, and execute it flawlessly.
The PE Profit Ladder will be highly visible this year! We'll see solid and largely opportunistic exits this year as PE firms seek to monetize holdings that were not ready to trade in the 2H2020-1H2022 wave. Others will make strategic carveouts from their current platform holdings, to return some capital to investors. 2023 M&A was slower as interest rates increased of course, but with better signals now there will be more movement in 2024. There is still $2.59 trillion of dry powder (per S&P Global) and a $2.8 trillion looming exit pileup (per Bain & Co.) But I predict significant activity this year will be around getting assets ready (making them as pretty as possible) for a bigger M&A push in early 2025. #PEprofitladder #privateequity #mergersacquisitionsdivestitures #wheretospendallthatdrypower
Innovative brands are embracing an alternative website strategy: multiple web domains. A hybrid digital approach empowered by AI tools that balance brand control with localized franchisee presence can allow brands to connect with customers in a more meaningful way, drive engagement, and unlock new growth...while also improving visibility about your franchise business opportunity.
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The PE Profit Ladder is at work at the top end of the market as well. Predictably, Subway is focused on recruiting experienced QSR MUOs to build out international markets to off set US closures. The international opportunity is indeed tremendous. Experienced turnaround CEO John Chidsey has made good progress so far on the plan. It is interesting that in recent interviews (e.g. Yahoo Finance) he mentioned how he appreciated having no debt when privately held...which allowed him to invest in the business and do some things needed to support the brand turnaround. That will certainly change under Roark, which is likely to put a massive amount of debt on the books and take a big cash distribution within 6 months of the acquisition. #peprofitladder
The more you can anticipate potential deal de-railers, the more likely you'll have a successful exit transaction worthy of your time, investment and effort. These derailers are, unfortunately, much more common than many business owners realize. Preparation is key!
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