If there’s a single practice sector that law firms should seek to grow in 2019, it’s deal work from middle-market private equity firms. Renowned for transforming lackluster companies into top performers ripe for a profitable spinoff or an IPO, private equity funds in the lower and middle market typically buy, build and sell. It’s a value-added investment approach pioneered in the early 1980s by Bain Capital Private Equity, among others. In the decades since, these funds’ managers have not only delivered impressive returns, they’ve also proven themselves shrewd and relentless M&A players. And that, of course, makes private equity funds naturally attractive for any law firm seeking to add depth in corporate and finance.
We spend a lot of time helping partners in New York expand their capacity to serve clients in the emerging technologies sector. For long-term growth, lawyers in these firms are solidifying their relationships with early-stage and growth companies. For more instant gratification, they’re expanding deeper into deal work for private equity funds, including those that target companies in the lower middle market. Multiple authorities, including PitchBook, which tracks private equity and venture capital investing, recorded a record-breaking volume of deals in 2018. Through the third quarter of 2018, deals in the vast middle market (ranging in value from $10 million to $1 billion dollars), totaled $311.7 billion, according to PitchBook, “almost double the $169 billion deal value of 2008.” Having amassed a staggering $3 trillion in uninvested capital, private equity firms are now in a fierce competition to snap up controlling stakes in companies they can reorganize and build to scale (often through add-on acquisitions) within a holding period of three to seven years.
