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Axial Radar: On Interest Rates and SMB M&A

Axial Radar

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Happy Friday and welcome to another edition of Axial Radar!

The Federal Reserve raised interest rates by another 0.75% this week. Rate increases, which are designed to slow the deployment of capital, are unsurprisingly causing a slow down in the number of leveraged buyouts getting done. The more expensive the debt, the lower the rate of return.

I feel like a broken record at this point, but the lower middle market has proven yet again that it operates independently of what may be going on in the rest of the capital markets. Don’t take my word for it though, just look at the numbers. Deals under $50M in total enterprise value have a lower debt-to-EBITDA ratio (3.4-3.6x vs 3.8-4.4x for deals >$50M). In other words, the smaller the deal, the less debt required to get the deal done. Scroll down to this week’s featured Industry Trends article, to read more about how strategies like add-ons are driving deal prices down, and how that is helping to continue to isolate those deals from macroeconomic pressures, like interest rate hikes.

Our featured buy-side members this week include a NY-based family office, an Alaskan corporation, and a firm led by a seasoned investment professional. On the sell-side we’ll introduce you to a 20 year old investment bank and an industry agnostic M&A brokerage firm.

Click here to follow Axial on LinkedIn and stay up to date on the latest trends in the world of Lower Middle Market deal making.


Axial

Featured Members

ASG Equities

ASG equities
Family Office

ASG Equities (ASG), headquartered in New York, is the real estate family office of the Gindi Family and has over 50 years of global real estate experience. With its high-quality dedicated team, the family office owns and operates a portfolio of real estate holdings and other private equity investments.

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Triangle Capital

Triangle Capital LLC
Investment Bank

Founded in 2003 by senior bankers from leading Wall Street firms, Triangle advises and represents middle-market businesses on a confidential basis – and without conflicts of interest – to achieve optimal results for their clients. The firm has a long track record of success in developing and executing mergers and acquisitions, financing transactions and rendering fairness opinions.

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Old Harbor Native Corporation

Old Harbor Native Corporation
Corporation

Old Harbor Native Corporation (OHNC) is one of 252 Native village corporations established by Congress in 1971 under the terms of the Alaska Native Claims Settlement Act (ANCSA). The company’s mission statement is to preserve and protect the culture, values and traditions of its community, shareholders and descendants; and to work together to create economic and educational opportunities while promoting self-determination and pride.

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ValueCap Inc.

ValueCap Inc.
Business Broker

ValueCap Inc. is an M&A Brokerage serving companies with $2M to $20M in revenue, working mainly on the sell-side. In addition, ValueCap offers valuation and advisory services and are industry agnostic but see concentrations in manufacturing, distribution, and business services.

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Iberatlantis Managment

Iberatlantis Managment
Family Office

Iberatlantis Managment is a family-owned company that seeks to buy or invest in small to medium sized companies. The firm is seeking businesses with strong management teams where the owner wants to leave and the company needs a financial partner. Their principal, Alvaro Presas Herrera, has invested in several companies in Spain, Latam, and the United States.

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This week from
Middle Market Review

Inventory, Automation & Allocation: Disparities & Dynamics in the Industrials Industry [Virtual Roundtable]
Read More

The Ecommerce Explosion: The Emergence of Online Marketplaces in the LMM
Read More

LMM Deal Digest: May 2022
Read More

Introducing The Lower Middle Market Add-On Report
​​​​​​Read More

Industry Trends

The Downturn is an Opportunity for Thematic Investors

Source: Grata

Get in Touch

Reach out to dani.forman@axial.net to learn more

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