Selling to Private Equity
If your company has $1M+ of EBITDA, private equity may be your highest-value exit. Here's how it works.
Why owners consider PE
Private equity can pay strong multiples, offer partial liquidity through a recapitalization, and fund the next stage of growth — while often keeping you involved.
PE vs strategic vs individual buyer
Private equity
Strong price, structured deals, rollover equity, growth capital.
Strategic buyer
May pay a premium for synergies; more integration and change.
Individual / search fund
Often SBA-financed; good for continuity, typically under ~$5M EBITDA.
PE FAQs
Do private equity firms buy small businesses?
Yes. Many PE firms and independent sponsors focus on companies with $1M–$10M of EBITDA, often as platform or add-on acquisitions.
What is a recapitalization?
You sell a majority stake to a PE firm, take significant cash off the table, and keep equity that can be worth more at the next sale — a 'second bite of the apple'.
What do private equity buyers look for?
Consistent EBITDA, growth runway, a capable management team, diversified customers and clean financial reporting.
What is rollover equity?
The portion of your ownership you reinvest in the new company alongside the PE buyer, giving you a share of its future sale.
Platform vs add-on: which one are you?
Platform acquisition
The PE firm's first company in a sector — usually $2M+ EBITDA with a management team. Higher scrutiny, often higher multiple, and you may roll equity.
Add-on acquisition
Bolted onto an existing portfolio company. Can be smaller and less polished; buyers pay for fit and synergies, and integration is faster.
Rollover equity: the second bite, explained
In a majority recap you might sell 70% for cash and "roll" 30% into the new company. If the PE firm grows and sells it in 4–6 years, that 30% can be worth more than you'd get for it today. Questions to ask:
- Is my rollover in the same class of equity as the fund's?
- How much debt is going on the business, and who is paid first?
- What is the fund's typical hold period and exit history?
- What are my rights if I leave or am removed as CEO?
- Is the rollover structured to defer tax on that portion?
Private equity fund vs independent sponsor vs family office
PE fund
Committed capital, repeatable process, formal diligence. Fixed hold period.
Independent sponsor
Finds the deal first, raises capital per deal. Can be flexible on size, but confirm funding before exclusivity.
Family office
Patient capital, sometimes indefinite holds. Process can be less predictable.
What PE diligence looks like
- Quality of earnings by an outside accounting firm
- Customer calls (late, with your permission)
- Management interviews and org review
- Legal, tax, insurance and environmental review
- IT, cybersecurity and systems review
- Industry and market study for platform deals
Expect 60–120 days from LOI to close. A sell-side prep review before you go to market reduces surprises and protects your price.