More Than Capital, Private Middle Market Investors as Strategic Consultants

Private equity direct investing can be particularly well suited to the middle market, where many acquisition opportunities involve privately held, founder-led or family-owned businesses.

Unlike a traditional blind pool structure, direct investing allows investors to evaluate an individual company and transaction before deciding whether to commit capital.

Direct investing can provide an opportunity for certain investors to contribute more than capital following an acquisition. Family offices, industry executives and other sophisticated investors may have substantial operating experience, industry relationships or specialized expertise that can be useful to the acquired company.

Depending on the transaction, these investors can serve as strategic resources to management by providing insight on areas such as growth strategy, operations, technology, customer development, industry relationships and future acquisitions. In the middle market, where management teams may have fewer internal resources than larger companies, access to this additional experience can be particularly valuable.

As a result, the direct investment model can create an alignment in which investors participate not only as capital providers, but in certain cases as strategic resources that can assist in the continued development of the underlying business.

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