Fast-growing, profitable middle market businesses have plenty of choices when it comes to M&A transactions. And the wide range of alternatives can make it difficult to select the best path for your business. So we’ve outlined a few pros and cons for several of the more common alternatives to help you start thinking about it.
This transaction comes in two flavors – high leverage and low/no leverage. What constitutes high and low leverage is in the eye of the beholder, but we typically aim for total debt to EBITDA of less than or equal to 2x at the time of our investment.
More debt may result in greater total proceeds at the time of the recapitalization, but leaves the business going forward with less opportunity and at considerably greater risk. Success and organic growth are more likely when: