Strategic buyers are often thought to have a competitive advantage in M&A over financial investors, but Peter Lehrman believes that buyout firms often can be a better strategic fit for company sellers, especially at the lower end of the market.
Lehrman, the CEO of the social business network AxialMarket, argues that the nation’s network of buyout shops, which he said collectively own more than 6,000 companies, are for all practical purposes the functional equivalent of strategic buyers.
In a recent survey of its private equity customers, AxialMarket found that 57 percent of its respondents had portfolio companies actively looking to grow through acquisitions, and more than 80 percent would review acquisition opportunities opportunistically for their portfolio companies. Thus, as Lehrman argued in a recent blog post, “There are thousands of private companies owned by private equity firms and our survey makes it clear that over 50 percent of them are actively looking to make add-on acquisitions as part of their growth strategy.”
That is a market that AxialMarket, launched in 2008, and a growing array of rivals are seeking to address. Online B-to-B marketplaces have attracted growing attention, with major players such as SecondMarket gaining publicity as a place where stockholders in pre-IPO companies such as Facebook can trade shares or LPs can find markets for their limited partnership interests.
So far, however, the audience for AxialMarket and its competitors remains tiny. Lehrman acknowledged in a conversation with Buyouts that his company’s platform, a sort of LinkedIn for buying and selling companies, has only about 3,000 total members, leaving a huge addressable market that is so far untapped. AxialMarket’s most direct rival is a 2010 launch, MergerID, an arm of the British publisher Pearson and a sister service to Pearson’s MergerMarket news service, Lehrman said.
Still, Lehrman has some background as an entrepreneur. Between college (at the University of Virginia) and grad school (the Stanford Business School), he worked with his brother Thomas D. Lehrman and Thomas’s partner Mark Gerson to establish Gerson Lehrman Group, a pioneering “expert network” founded in 1998 that attracted a $200 million investment from technology investment firm
For Lehrman, who also did a stint at