Selling Your Business to Private Equity
As business owners and entrepreneurs look to create personal liquidity, private equity has become an increasingly dominant force in the small business framework.
As you’ve forged ahead through peaks and valleys to create success, the number of potential buyers for your company has likely dwindled. After all, few individuals can afford to write a check for $10 million or more.
Yet, there is a MASSIVE pool of capital in the market looking to acquire lower and middle-market businesses.
Who is Buying $5M – $50M Companies?
In the lower middle market space (traditionally defined as revenue between $5 million and $50 million), there are four primary types of buyers:
- Private Equity
- Family Offices
- Corporate/Strategic Buyers
- High Net Worth Individuals
Statistics suggest that 70% of lower middle market companies will change hands over the next decade. This represents a massive shift in wealth and a strong source of returns for private equity funds looking to create “platform companies.”
However, selling your mid-market business to a PE firm is vastly different than selling to a peer or a competitor.
In our Charting Opportunities series, we sat down with Jay Ripley of GEM (a leading Outsourced Investment Office in Charlotte) to break down exactly how private capital views the next 5-10 years.
We unpacked the critical steps owners must take before going to market:
- Professionalization: The specific steps to professionalize your operations and financials for pre-transaction due diligence.
- Valuation: How to negotiate an attractive multiple in the current interest rate environment.
- Structure: The pros and cons of selling a minority stake vs. giving up total control.
- Positioning: determining if you are big enough to be a “platform company” or if you are better classified as a “rollup opportunity.”
Preparing for a liquidity event requires viewing your business through the lens of these sophisticated buyers long before you sign a Letter of Intent.
Jay Ripley’s insights into the “Endowment Style” investment program offer a rare glimpse into how institutional money thinks.
You can watch the full breakdown of private equity trends and what they mean for your exit below.
