Free Guide: How to Sell Your Business to Private Equity
Learn How to Sell Your Company to Private Equity
Understand what PE firms look for, how business valuations work, and the complete sales process—so you can get the most value from your company.
Written by a CEO with 25+ years of private equity experience. Free. No credit card required.
Common Questions This Workbook Answers
How do I know if PE will be interested in buying my company?
Learn the specific criteria private equity firms use to evaluate acquisition targets.
What is my business worth to private equity?
Understand EBITDA multiples and how PE firms calculate company valuations.
How does the PE sales process actually work?
Step-by-step guide from initial outreach to closing the deal.
What EBITDA multiple can I expect for my business?
Industry benchmarks and factors that affect your company valuation multiple.
Interactive Workbook Chapters
Use this interactive workbook to understand your company strengths, uncover weaknesses, and discover exactly what it takes to attract private equity interest.
Start the Free Workbook
Frequently Asked Questions About Selling to Private Equity
What do private equity firms look for when buying a company?
Private equity firms look for companies with strong EBITDA margins (typically $3-5 million minimum annual EBITDA), recurring or predictable revenue streams, experienced management teams willing to stay post-acquisition, clear growth potential, defensible market positions, low customer concentration (no single customer exceeding 15-20% of revenue), and scalable operations.
How long does the private equity sales process take?
The private equity sales process typically takes 6 to 12 months from initial outreach to closing. This includes preparation phase (2-3 months), marketing phase (2-3 months), due diligence phase (2-3 months), and negotiation/closing phase (1-2 months).
What is EBITDA and why does it matter for private equity valuations?
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is the primary metric private equity firms use to value companies because it represents the true cash-generating ability of the business. PE firms apply a multiple to EBITDA (such as 5x or 7x) to determine enterprise value.
How do I prepare my company for a private equity sale?
Key preparation steps include: clean up financial statements with audited financials for the past 3 years, reduce customer concentration, build a strong management team, document all processes and systems, address legal and compliance issues, understand your adjusted EBITDA including add-backs, and develop a compelling growth story.
What EBITDA multiple will private equity pay for my business?
EBITDA multiples vary by industry, company size, and growth rate. Most middle-market companies ($3-15M EBITDA) sell for 4-8x EBITDA. High-growth companies may command 8-12x or higher. Key factors include recurring revenue percentage, growth rate, market position, and management team strength.
What is an earn-out in a private equity deal?
An earn-out is a portion of the purchase price contingent on the company achieving certain performance targets after closing. While earn-outs can bridge valuation gaps, sellers should be cautious as they transfer risk from buyer to seller. The general rule: avoid earn-outs when possible.
What role does management play after a private equity acquisition?
PE firms typically want existing management to stay and often require key executives to roll 10-30% of their proceeds as equity in the new deal. This aligns incentives between management and the PE firm. Strong, independent management teams command higher valuations.
What happens during private equity due diligence?
Due diligence is a comprehensive 60-90 day review covering: financial records (Quality of Earnings analysis), legal documents, customer contracts, employee agreements, operations review, IT systems, regulatory compliance, and intellectual property. A well-prepared data room speeds up this process significantly.
Introduction: Selling Your Business to Private Equity
This journal is designed to help you understand the private equity sales process. Use this journal to gauge how attractive your company is to private equity now or will be in the future.
The journal will also help you improve your business whether you sell or not, because the criteria that private equity firms look for generally improve cash-flow and value overall.
What You Will Learn:
- Understand the PE Sales Process - Learn how the private equity sales process works from start to finish
- See Your Business Through PE Eyes - Learn to evaluate your own company the way private equity investors do
- Maximize Your Business Valuation - Understand how to better position your company and increase its value
- Improve Profitability - Whether you sell or not, the changes you make will increase profitability
Read the full Introduction
Chapter 1: Private Equity Criteria - What PE Firms Look For
Understanding what private equity firms look for in potential acquisitions is critical to positioning your company for a successful exit.
Key PE Investment Criteria:
- EBITDA Requirements - Most PE firms target companies with $3-5 million minimum annual EBITDA
- Revenue Growth - Consistent year-over-year revenue growth demonstrates market demand
- Customer Concentration - No single customer should exceed 15-20% of total revenue
- Management Team - Experienced leadership willing to stay post-acquisition
- Industry Dynamics - Favorable market trends and growth potential
- Recurring Revenue - Predictable revenue streams reduce investment risk
Interactive Worksheets Include:
- Revenue and EBITDA tracking chart
- Customer concentration analysis table
- Management team assessment
- Industry dynamics evaluation
- Adjusted EBITDA calculator
Read Chapter 1: Private Equity Criteria
Chapter 2: Things to Consider Before You Start
Before you begin the sales process, there are critical factors you need to consider. Proper preparation can significantly impact your final valuation and the success of your transaction.
Key Topics Covered:
- Working with PE Firms as CEO - What PE firms look for in leadership and management
- CEO Attributes - Strategic thinking, data-driven decision making, and growth mindset
- Debt and Leverage - Understanding how debt affects your company post-acquisition
- Platform vs Tuck-in - Are you a platform company or acquisition target?
- HR and Employee Considerations - Preparing your team for the transition
- Valuation Expectations - Setting realistic expectations for your company value
Interactive Tools:
- CEO attribute self-assessment ranking
- Debt leverage calculator
- Platform company evaluation
- Valuation calculator with EBITDA multiples
Read Chapter 2: Things to Consider
Chapter 3: The Private Equity Sales Process
A comprehensive guide to navigating the sales process from start to finish, including timelines and key milestones.
The 13-Step Sales Process:
- Selecting the Investment Banker - Choosing the right advisor to run your process
- Data Room Preparation - Organizing all documents for due diligence
- Building the CIM - Creating the Confidential Information Memorandum
- Financial Model - Developing projections and forecasts
- Marketing - Reaching out to potential buyers
- Management Presentation (MP) - Presenting to interested PE firms
- Letter of Intent (LOI) - Receiving and evaluating offers
- Due Diligence - The comprehensive business review
- Sales Purchase Agreement (SPA) - Negotiating the final contract
- Employment Agreements - Structuring management retention
- Working Capital - Understanding working capital adjustments
- Sources and Uses - How the deal is financed
- Close and Fund - Completing the transaction
Data Room Categories:
- Corporate and Organizational Matters
- Operations documentation
- Financial statements and records
- Sales and Marketing materials
- Technology and IT systems
- Human Resources files
Read Chapter 3: The Sales Process
Chapter 4: Negotiations and Common Sticking Points
Deals do not always close. A failed exit is more than possible. Learn the most common reasons why deals fail so you can get ahead of issues and manage them better.
Common Deal Killers:
- Retrade - When the deal value changes during due diligence, usually during the Quality of Earnings (QofE) review
- Representations and Warranties - Understanding fundamental vs general reps
- Indemnification - Your exposure after the deal closes
- Escrow and Holdbacks - Money held back to cover potential issues
- Earn-outs - Contingent payments based on future performance
- Working Capital Disputes - Disagreements over normalized working capital
Private Investment Memorandum (PIM) Components:
- Executive Summary
- Company Overview
- Financial Overview with pro forma data
- Industry and Market Overview
- Deal Risk analysis
- Valuation Overview
- Exit strategy and timing
Read Chapter 4: Negotiations
Chapter 5: Private Equity Terminology and Lingo
Essential terminology and jargon used in private equity transactions. Understanding these terms is crucial for effective communication during the sales process.
Must-Know PE Terms:
- EBITDA - Earnings Before Interest, Tax, Depreciation, and Amortization. The primary valuation metric.
- CIM/Book - Confidential Information Memorandum used to market the company
- LOI - Letter of Intent, the initial offer from a PE firm
- QofE - Quality of Earnings audit going back 3-5 years
- TTM/LTM - Trailing/Last Twelve Months of earnings
- Platform - A company that can scale with minimal capital investment
- Tuck-in - Smaller acquisitions absorbed into a platform company
- Roll-over - Equity the existing team rolls into the new deal (typically 20-40%)
- Retrade - When the deal gets repriced during due diligence
- Enterprise Value (EV) - Total value of the company including cash, minus debt
Additional Important Terms:
- Adjusted Earnings and Addbacks
- Accretive acquisitions
- Management Presentation (MP)
- ReCap (Recapitalization)
- De novo growth vs acquisition
- Strategic Buyer vs Financial Buyer
Read Chapter 5: PE Terminology
Chapter 6: Sample PE Deal Documents
Templates and examples of key documents used in the private equity sale process. These samples are for educational purposes to help you understand what each document contains.
Sample Documents Included:
- Investment Banker Engagement Letter - The contract with your financial advisor covering exclusivity, services, and fees
- Non-Disclosure Agreement (NDA) - Confidentiality agreement signed by potential buyers
- Indication of Interest (IOI) - Initial, non-binding expression of interest from buyers
- Letter of Intent (LOI) - Formal offer outlining deal terms, valuation, and exclusivity period
Key Document Sections to Focus On:
- Exclusivity clauses and timelines
- Fee structures (retainer, success fees, tail provisions)
- Representations and warranties
- Indemnification provisions
- Working capital targets
- Conditions to closing
Important: These sample documents are for educational purposes only. Always work with qualified legal and financial advisors for your actual transaction.
Read Chapter 6: Sample Documents
About the Author
John Minahan is a seasoned CEO, board member, and private equity operator with 25+ years of executive leadership across healthcare, technology, manufacturing, and media industries.
- Led 5 strategic exits to private equity and strategic buyers
- Completed 20+ M&A transactions as both buyer and seller
- Served as CEO of multiple PE-backed portfolio companies
- CPA with deep expertise in financial analysis and EBITDA optimization
Learn more about John Minahan
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