Business Sellers Increasingly Play Banker

During the recession, merger and acquisition activity in the lower-middle market (private companies with up to $100 million in annual sales) was anything but active. Now sharp discounts of private company valuations—I'm seeing 30 percent to 40 percent reductions from 2007 levels—are again piquing buyer interest. But with deals on the table and the dialing for dollars begun, the bank loan market, which is still licking its wounds from the credit crunch, is coming up short. Buyers are increasingly turning to sellers to fill the funding gap. It's not that financing is unavailable. Companies with strong recurring cash flow and significant collateral can still obtain debt. They're just raising less of it and at a higher cost.

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