JULY 2024BUSINESSMANAGEMENTREVIEW.COM8IN MY OPINIONBy Andrea Natarelli, Vice President of Mergers Acquisition, Lynx Equity LimitedTHE NEW "AMERICAN DREAM" In today's world, social media is littered with get-rich-quick "opportunities." It mostly involves drop-shipping or other ways to make money in the fastest way possible. This perfectly reconciles with the two soon-dominating generations, Millennials and Gen Z, which seem to have lost the ability to endure along with the concept of patience. The famous quote "Rome wasn't built in a day" doesn't seem to resonate with them as well as it did for Boomers. As history teaches, with the exception of situations of extreme luck, there doesn't seem to be a clear and easy path to quick wealth creation. For the greater majority of these "online opportunities," the recipient is not the beneficiary but the product. Wealth creation has always been a function of some sort of a real, tangible "value-add" created for society in the form of a product or a service. Furthermore, the building of a product or a service that creates value in people's lives has always been the backbone of entrepreneurship. While we, Millennials and Gen Z, are busy chasing the last trends on the Gram or scrambling for the last "web ticket" to Eldorado, there seems to be a tiny substratum of individuals out there that have put their eyes on cashflow generating family-owned small businesses that are looking for someone to take them over. Now, let's be in tune with our time and our X Folks and friends and call them "SMB." SMBs are usually small, $2M to $20M in revenue, family-owned businesses that tend to operate in the blue-collar world. These entities, which come in the form of commercial cleaning businesses, flooring contractors, HVAC installers, sign manufacturers and many others, employ almost half (46%) of America's private sector workforce and represent more than 40% of gross domestic product.Since the majority of the private equity firms out there tend to focus on much larger, better-established organizations, the lack of buyers combined with the greater risks associated with these smaller entities mostly related to their size, lack of systems and infrastructures and ultimately mos,t importantly, key man risk, has made SMBs somewhat hard to sell. For these reasons, exit multiples have been historically low, generally ranging from 2.5x to 5x the EBITDA (Earnings Before Interest
< Page 7 | Page 9 >