2021 Private Capital Markets Report

ESOP Association and Employee Ownership Foundation Sponsor Recently Released 2021 Private Capital Markets Report.

The 2021 Pepperdine Private Capital Markets Report was originally launched in 2007 and is the first comprehensive and simultaneous investigation of the major private capital market segments. Each year’s survey examines the behavior of senior lenders, asset-based lenders, mezzanine funds, private equity groups, venture capital firms, angel investors, privately-held businesses, investment bankers, business brokers, limited partners, and business appraisers.

The Pepperdine survey investigated, for the first time this year, Employee Stock Ownership Plans, in the succession planning process for private businesses.

The business owner survey found 49% of respondents anticipate transferring ownership of their business in 5 years or less with 74% of respondents anticipating transferring ownership in 10 years or less.

387 privately-held businesses responded to the business owner survey in 2021. The majority, 52%, of respondents had less than $1 million in annual revenue and 42% or 162 companies surveyed had between 1-5 employees.

28% of respondents are employee owned; 22% of those have an ESOP.

The number one reason respondents chose not to establish an Employee Stock Ownership Plan is the cost to set up and administer, with 29% of the responses.

However, 27% of respondents said they chose not to set up an ESOP either because their primary advisors suggest it is too complicated or administratively burdensome, or their fear of Department of Labor as the primary regulator/downstream financial & reputational exposure.

Other highlights from the survey:

Of the respondents who were seeking financing in the last 12 months, approximately 37% anticipated to raise less than $100,000 in capital.
Approximately 44% of respondents reported that they were seeking bank business loans or business credit card financing as a source of funding, followed by friends and family.
88% of privately-held businesses that sought bank loans over the past 12 months were successful. Survey results indicated that business owners who raised capital on average contacted 1.7 banks.
Approximately 41% of respondents believe impacts from COVID-19 are the number one issue small businesses face today, followed by labor availability (30%), domestic economic uncertainty (26%) and government regulations and taxes (26%).
According to small businesses, of those policies most likely to lead to job creation in 2021, increased access to capital emerged as number one (86%) followed by tax incentives (65%), and regulatory reform (39%).
Of those that do plan to hire, sales and marketing skills (40%) and skilled labor (35%) are in greatest demand followed by service/customer service (31%).
81% of companies planning to hire indicate they’d need to train those they hire.

TEA Members Can Find the Report Here: http://privatecap.org/reports

To get the code for a free copy of the report please email: esop@esopassociation.org

The Business Owners Survey, which includes ESOP data can be found on pages 99-122.