Lower-middle market companies are unique to the middle market, unlike companies you’d find in the upper-middle market, they tend to be more “Mom and Pops.” A recent article in the Motley Fool blog points out the surprising differences on how lower-middle market companies react to the M&A market.
Lower middle market companies represent a world of difference from their upper middle market counterparts. Rather than Ivy League educated CFOs, the lower middle market tends to be dominated by family owned businesses. Owners and managers tend to be family members.
Because of this dynamic, companies in the lower middle market are not often jumping to sell at the first opportunity. In fact, many can be reluctant to sell. Main Street Capital Corporation, who specializes in the lower-middle market, alluded that this market is often “backwards” when Vince Foster stated on a recent conference call that:
[W]hat we’re seeing is our companies are more reluctant to sell than we are…[W]e’re saying if you can go get 7 or 8 times we would be more inclined to do that, they don’t want to and we tend to support them. It’s kind of amazing that that’s the case but that’s just the way they happen to be.”
It may not be a fast moving, finance-driven environment, but the lower middle market can offer impressive returns. And as the blog post points out, patience creates opportunity.
To read the Motley Fool post, please click here.