Private Equity Exit
Private equity firms are sophisticated buyers with clear criteria and structured processes. We help you navigate their world and maximise your outcome.
Understanding PE Buyers
Private equity firms evaluate opportunities through a specific lens focused on returns potential, value creation opportunities, and exit timing. Understanding their perspective is essential to positioning your business effectively.
PE firms typically target returns of 20-30% annually (IRR). This means they need businesses that can grow significantly, improve operationally, or be acquired at attractive valuations with potential for multiple expansion.
Most PE firms have specific investment criteria around size (minimum EBITDA), sector focus, and geographic scope. Understanding which firms are genuinely interested in businesses like yours saves time and improves outcomes.
Platform vs Add-On Dynamics
PE firms acquire businesses as either 'platforms' or 'add-ons.' Understanding this distinction is crucial because it significantly affects valuation and process.
Platform investments are larger businesses that serve as foundations for building bigger companies through organic growth and acquisitions. Platforms typically receive higher valuations and more favourable terms because they are harder to find.
Add-on acquisitions are smaller businesses acquired to bolt onto existing platforms. While add-ons may receive lower multiples, PE-backed buyers often move quickly and can offer certainty that independent buyers cannot.
The PE Transaction Process
PE transactions follow structured processes with multiple phases. Understanding what to expect at each stage helps you prepare and perform effectively.
Initial discussions focus on high-level fit: size, sector, growth profile. If there is interest, PE firms will request an information memorandum and conduct preliminary analysis. This stage filters out mismatches early.
Serious interest leads to management meetings where PE firms assess the team, strategy, and culture. These meetings are critical—PE firms invest in people as much as businesses. Preparation and presentation matter enormously.
Following management meetings, interested parties submit indications of interest (IOI) or letters of intent (LOI). These non-binding offers outline proposed terms and serve as the basis for selecting a partner and moving to exclusivity.
Due Diligence Expectations
PE due diligence is thorough and comprehensive. Firms deploy teams of specialists—financial, legal, commercial, operational, technical—to scrutinise every aspect of your business.
Financial due diligence examines historical performance, quality of earnings, working capital patterns, and projections. Commercial due diligence assesses market position, competitive dynamics, and customer relationships. Operational due diligence evaluates processes, systems, and improvement opportunities.
Being prepared for due diligence is essential. Disorganised information, surprises, or inconsistencies damage credibility and can derail transactions. We help you prepare comprehensive data rooms and anticipate buyer questions.
Management Rollover and Incentives
PE firms typically expect management to 'rollover' a portion of their proceeds into the new company. This aligns incentives and demonstrates confidence in the business going forward.
Rollover percentages vary but typically range from 10-30% of management proceeds. In addition, PE firms usually establish management incentive plans that provide significant upside if performance targets are achieved.
Understanding these expectations upfront helps avoid surprises. We help you evaluate rollover requirements and negotiate incentive structures that appropriately reward your contribution to future value creation.
Maximising Your PE Exit
Successful PE exits require preparation, positioning, and professional execution. Starting early gives you time to address issues and optimise the business before going to market.
Running a competitive process with multiple PE firms creates tension that drives better outcomes. Even if you have a preferred buyer, engaging alternatives provides leverage and validates value.
We help you identify the right PE firms, prepare compelling materials, manage the process professionally, and negotiate terms that achieve your objectives. Our experience with hundreds of PE transactions enables us to anticipate issues and maximise outcomes.
Frequently Asked Questions
QWhat size business do PE firms look for?
PE firm requirements vary widely. Lower middle market firms may consider businesses with £1M+ EBITDA, while larger firms require £5-10M+ EBITDA. Some firms focus on smaller add-on acquisitions. We help you identify firms that match your profile.
QWhat returns do PE firms expect?
PE firms typically target 20-30% annual returns (IRR). This drives their valuation models and requirements for growth, operational improvement, or multiple expansion during their ownership period.
QWill I have to stay after selling to PE?
PE firms typically want management continuity during transition, often requiring 1-3 years of continued involvement. The extent of involvement and terms are negotiable. Some owners exit fully, others remain involved long-term.
QWhat is management rollover?
Rollover is reinvesting a portion of your sale proceeds into the new PE-backed company. This aligns your interests with the PE firm and provides opportunity to benefit from future value creation. Typical rollover is 10-30% of proceeds.
Ready to take the next step?
Start with a confidential conversation. We will discuss your goals, assess your situation, and provide an honest view of your options.
Get in Touch