“Make no mistake, small and medium sized companies that compose the “lower middle market” are substantial enterprises. Many have compelling business models, generate substantial annual cash flow and are growing businesses. Their lack of access to the public markets is a blessing to private equity investors. The non-public markets at the lower end of the middle market are highly inefficient and a talented private equity firm can access those inefficiencies to benefit its investors’ returns. Frequently, these small and medium sized companies have been neglected from a management and resources perspectives, oftentimes for multiple years. The right private equity firm can generate significant alpha by establishing or upgrading basic infrastructure in an existing business (e.g. new management, sales teams, CRM systems, financial reporting and operational dashboards). These basic investments allow businesses to scale efficiently which frequently jumpstarts revenue growth, improves operating margins, and increases shareholder value.”

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