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Trends Watch: June 29, 2017

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.  

This week, Elana talks to Parul Dubey, Vice President, Yenni Capital.

What is your outlook on lower middle market private equity?

There has been much interest in the lower middle market (LMM) space in recent years with an influx of capital intensifying competition for deals. The rise of online marketplaces for LMM deal-making has provided sellers access to a broader pool of buyers and vice versa, thus mitigating informational asymmetries that historically permeated the space. This means 3 things for LMM private equity - a more efficient marketplace going forward, evolution of creative deal sourcing strategies and a shift from seeking purely undervalued assets to assets with greatest potential for growth on the back of unique capabilities and relationships of buying entities. This will place more emphasis on sector-specialist operating partners and arguably lead to healthier companies at exit. Overall, LMM remains an exciting and attractive space to invest in, and is expected to attract more capital.

Which segments of the LMM are you currently interested in?

We acquire controlling interests in profitable LMM niche manufacturing and business services companies, which tend to be characterized by fragmented competitive landscapes and mature end-markets. With ongoing innovation in some of these end-markets, LMM businesses with access to larger clients, capabilities to evolve their offering with changing client needs and strong business and corporate development functions currently pique my interest. 

What keeps you up at night?

Geopolitical instability and risk of an economic recession in the intermediate term.

Elana Margulies-Snyderman is an investment industry reporter and writer who develops articles, opinion pieces and original research designed to help illuminate the most challenging issues confronting fund managers and executives.

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