Assuming I spotted a LBO candidate (small cap), should I raise the idea to a PE firm (Big? Small?) or set up my own firm to do it?
And with either choices, what are the procedures, risks and considerations?
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whats that supposed to mean?
Super m, the fact that you are asking this questions indicates to me that you are not sophisticated enough to set up your own firm. Setting up your own fund or shop would require prior experience, capital or the ability to raise capital from LPs, etc. No one would sell to a novice PE investor because the execution risks are too high. So you an scratch that idea off the list.
Cold-calling PE funds with your idea also will likely be ineffective because it will require that they sign an agreement to pay you a broker's fee, which they wont do without you sharing the idea (or at least the data on a no names basis).
How are you so sure it is such a good deal? Do you have access to management? Just because a company may be perceived as an LBO target (basis on financial metrics) does not mean that they are willing sellers or even a worthwhile target.
Hate to be so skeptical but sounds like a long shot. Provide some more details.
Hi Junkbondswap,
You are right in that I am not sophiscated enough to set up my own firm. Im only a analyst 2/3 equivalent.
I have also thought about the second point, whats the norm for the fees? I heard its no longer based on lehmans formula and probably low single digit % of total deal value. Info/data can be shared, no problems. I am just hoping to get a fee or at on a more optimistic (and certainly impossible) note, to have participation. Not to sure about whether will PE funds take the idea without paying as I am as you mentioned, purely a broker with no other functions. (Probably I can do a model and analysis with some due d).
I have PM you the reasons.
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