M&A Advisory for Private Equity Transactions

Selling to a private equity firm looks and feels different than selling to a strategic. Understanding the differences matters.

What PE buyers optimize for

PE firms are professional buyers. They're solving for a defined return over a defined hold period, typically 3–7 years. They want profitable businesses with clean financials, growth opportunity, capable management, and a path to a next buyer.

Deal structure differences

• Rollover equity — sellers often keep 10%–40% of the business in the new capital structure
• Management incentive plans — key managers get equity in the new company
• More sophisticated working capital and net debt mechanics
• Increasingly, reps and warranties insurance

The upside of PE

• Professional counterparties who close deals for a living
• The rollover creates a 'second bite at the apple' that often exceeds the first
• Management team often gets equity they never would have had
• Speed and certainty — PE firms move faster than most strategics

The downside of PE

• Aggressive diligence — expect a QoE, commercial diligence, IT diligence, HR diligence
• Tighter reps and warranties with less negotiation flexibility
• The business you sold will be run differently after closing
• The value of your rollover depends on the PE firm's performance

How to prepare

Get financials audited or QoE-reviewed. Understand your normalized EBITDA cold. Have a management team ready to run without you. And take rollover economics seriously — that second bite is often where the biggest dollars are.