Middle Market M & A, 2nd Edition

CHAPTER 8Corporate Development and the Buy‐Side Process

As mentioned in Chapter 2, the two major players in the private capital markets are strategic buyers (strategics) and financial buyers (financials), which include private equity firms and other entities that invest chiefly for financial reasons. Strategics are corporate buyers typically seeking to gain from the synergistic effects of combining operations as well as from the magic of new capital or financial engineering. For smaller strategics that are themselves middle market companies, an acquisition may mean a merger of equals or the purchase of some or all of the assets of a smaller business, or even a bigger one. For larger strategics, including S&P 500–sized public companies, an acquisition of a middle market business is likely part of a series of transactions within an overall strategic initiative. This is of particular interest given the increased level of activity in the middle market by larger strategic buyers as they seek to deploy the record amounts of capital currently stored on their balance sheets.¹ Teams within larger strategic buyers that lead external initiatives, including acquisitions and divestitures, are generally referred to as corporate development teams. In the context of this handbook, the focus on corporate development is about their acquisitions.

For middle market companies and their M&A advisors, understanding the role and motivations of those in corporate development can be valuable in navigating ...