Should I sell to private equity?

What a private equity buyer is actually buying

Two things, usually. A business that generates predictable cash, and a management team that will keep generating it.

That second part is the important difference from a strategic buyer. A strategic acquirer often has their own management and back office, and may want you gone within a few months. A private equity platform is generally buying the operation intact, including the people who run it, because they do not have anyone to replace them with.

This shapes everything about how the deal is structured.

Platform versus add-on

If you are the first acquisition in a sector, you are the platform. The buyer builds around you: your systems, your brand, sometimes your management running the wider group. That can be an excellent outcome for an owner who wants to keep going with better capital behind them.

If a platform already exists, you are an add-on. Your operation gets folded into theirs, usually adopting their systems, their brand and their processes over a year or two. Add-ons often price well because the buyer can see the synergies immediately, but you will have less influence over what happens next.

The rollover question

Most private equity offers include rollover equity: instead of taking all cash, you keep a stake in the new entity, typically ten to thirty percent of your proceeds.

The pitch is the second bite. If the platform grows and sells again in five years at a higher multiple, your retained stake can be worth as much as the cash you took at closing, sometimes more.

That does happen. It also does not happen. Your rolled equity is usually a minority position with no control, and it is worth what the next sale says it is worth. Treat it as an investment you are choosing to make, not as part of the price, and ask whether you would put that same amount of your own money into this platform if someone offered it to you cold.

What life looks like afterward

Reporting. Monthly financials, board meetings, budgets and variance explanations. For an owner who has run their business by instinct for thirty years, this is the largest cultural adjustment, and it is worth being honest with yourself about whether you will find it tolerable.

Capital. The genuine upside. Acquisitions you could not fund, equipment you deferred, hiring you could not justify. Many owners find the business grows faster in the five years after the sale than in the five before it.

Autonomy. Reduced, and reduced further after the first year. You are now an executive with a board rather than an owner.

Who this suits, and who it does not

It suits owners who want to take significant money off the table, still have energy for the business, and would enjoy having capital behind them. It suits owners whose management team wants to keep going.

It suits less well an owner who wants a clean break. If your goal is to be finished within a year, a strategic buyer will usually give you that more easily, and you should weight that heavily even against a somewhat higher headline number from a platform.

The decision is worth making before you go to market, not while you are holding two offers, because it changes who your advisor should be approaching in the first place.