Today’s leveraged buyouts are in the small market. It used to be that LBO’s were essentially limited to bigger players (buyers) since banks and money sources had just begun to get comfortable with the concept. It was clearly not easy for the small buyer to pull of an LBO given that financing sources simply did not have a comfort level to the degree of reaching down and fianncing LBO’s for the smaller market. If you read my previous posts I talk about the eighties as being the heyday of LBO’s. Most modern day LBO techniques can be traced back to deals done in that decade. It was then that the banks were educated on how to finance them.  Prior to that leveraged buyouts occured but were simply not mainstream.

Today, LBO’s have nearly come and gone. This is good for the small guy in many ways. For one thing financial institutions now have years of experience in financing LBO’s and do not mind financing these deals at all size levels. That doesn’t mean that anything goes. It means that a properly structured buyout of a company even as low as $3 Million in sales can be arranged which probably would have been impossible in 1985. At the same time large players, because money has been so free, are doing deals that are not at all leveraged. They have enough money to chase deals at high levels with big money and compete against other big money outfits. So can effectively shun the small market and still deploy their investor’s assets. This opens up the world for the small buyer who perhaps only wanted to chase deals between $1mm and $10mm  in sales anyway.

Small leveraged buyouts provide a huge fertile market for small buyers just because of the sheer number of small sellers out there.  The number of small sellers, like the number of small businesses, is exponentially higher at the under $10mm level than over $10mm. This represents only opporunities galore for the small buyer armed with leveraged buyout techniques from whichever era they like.