Obsidian Point Partners Commentary - The Succession Opportunity

Family owned and Main Street businesses account for a substantial percentage of the US economy; with over 350,000 Businesses generating revenues between $5mm and $100mm.

These businesses; often family owned, have been significant drivers of wealth, capital allocation and productivity across many regions of the Country. A significant portion of these are also owned by aging baby boomers who are starting to transition into other stages of life. According to certain statistics – over 50% of the 30 million small businesses in the US are owned by Baby boomers.

Baby Boomers; defined as people born between 1946 and 1964 and who as a generation are the beneficiaries of decades of strong US economic growth have long pursued entrepreneurship and family businesses as a route to the creation of wealth.

However, as the majority of Boomer Business owners move into a transitional phase and are looking to pass on not just wealth but operating assets and businesses – they are encountering significant succession challenges.

According to Wilmington Trust; 58% of business owners have not created a specific plan for succession. This is even more problematic when you consider the characteristics of the businesses in question: • 89% are privately owned with any formal Private Equity Ownership. • 66% are family owned. • 81% generate $10MM+ in sales. • 73% have been in business for more than 20 years.

These businesses are a valuable and profitable part of the economic fabric and productivity base of the United States and as such, the macroeconomic problem caused by this general lack of succession planning is both a significant problem and a potentially massive opportunity set.

At Obsidian Point Partners LLC – we believe that the “Silver Tsunami” of asset and wealth transfer that will occur as the Baby Boomer generation transitions is an opportunity to provide win-win solutions to Family-Owned Businesses and Lower Middle Market businesses that are looking to keep their legacy alive by transitioning to formalized / institutional ownership.