Private Equity Today, Search Funds, and the Paramount Merger

The private equity market has evolved and matured significantly in recent years, driven by several key factors that have reshaped the industry, including increased fundraising and capital deployment. In 2022 alone, global private equity fundraising reached approximately $1.2 trillion. This influx of capital has allowed firms to pursue larger deals and diversify their investment strategies. Mega-deals, particularly those exceeding $10 billion, have become more common, reflecting the growing financial power of PE firms. More recently, the fundraising and investment growth have slowed.

Private equity firms are increasingly utilizing initial public offerings (IPOs) and Special Purpose Acquisition Companies (SPACs) as exit strategies. This trend reflects the strong performance of public markets and the desire to realize returns more quickly

Search funds and other new financial buyers have emerged as innovative participants in the M&A market, reflecting the evolving landscape of deal-making and investment strategies. A search fund is a pool of capital raised by entrepreneurs to acquire a small to medium-sized business. An entrepreneur typically does not have a specific target company in mind when raising the fund. They use the capital to search for a suitable business to buy, operate, and grow over time. Once a suitable acquisition target is identified, additional capital is raised to fund the purchase. The searcher often assumes a significant operational role in the acquired company, such as CEO. Search funds typically target small, profitable companies with stable cash flows and a potential for growth, often in niche industries. 

The ongoing Paramount $28 billion merger with Skydance Media was announced in mid-2024. Skydance, known for its strong portfolio of film and television productions, including the "Mission: Impossible" and "Transformers" franchises, is set to merge with Paramount to create a media powerhouse.

This transaction follows an intense period of negotiations and competition, notably with Edgar Bronfman Jr. dropping his bid for Paramount, which cleared the path for the Skydance deal to proceed. This competition extended the timeline as both Paramount and Skydance had to navigate these competing interests and reassess their strategies to ensure the merger would be successful. The merger is expected to provide both companies with enhanced content creation capabilities and greater leverage in negotiations with streaming platforms. 

The 45-day "free look" period in the Paramount-Skydance Media transaction was a significant aspect of the deal, providing both parties with a window of time to thoroughly assess the implications and potential risks of the merger and the flexibility to withdraw from the deal. 

Selling a business is the American dream, the pot of gold at the end of the rainbow, the reward for years of hard work. Successful entrepreneurs make countless sacrifices in hopes that they would someday reap the benefits of their labor and live a new life of vacations, recreation, and prosperity.

You only exit your business once, so you should feel confident passing this milestone. A successful business exit reflects the preparation done beforehand. Failing to plan is planning to fail.

The owner of a privately held company has several alternatives on how to exit their business. In the absence of an exit strategy, events will inexorably dictate the final exit plan. A costly involuntary exit may be caused by death, disability, divorce, disagreement, or distress.

Selling Your Business with David King will help you take control of the sale process and make it positive one.