💣 You'll learn: How private equity creates value and that sellers could implement these exact strategies before they exit.

⏱️ Read time: 5 minutes

🔍 Real deal analyzed: conversations with private equity

THE REAL DEAL

The Private Equity Playbook Revealed

Last week at the Association for Corporate Growth conference, I watched as private equity professionals and investment bankers swapped stories of their biggest wins. A pattern emerged that should make every business owner sit up and take notice.

"We made 5x our money on that manufacturing business," a PE partner told me over coffee. "And honestly, 80% of what we did could have been implemented by the previous owner before selling."

US PE deal activity: Private equity deals bounced back strongly in 2024, with companies worth $838.5 billion changing hands and more deals getting done compared to last year.

What I found fascinating was how transparent these buyers were about their playbooks. They aren't hiding their strategies, they're literally presenting them on PowerPoint slides. Yet most sellers leave this money on the table.

"Our best deals are companies with great foundations but obvious next-level opportunities," another investor confided. "If an owner implemented even half of our value creation plan before selling, they'd capture millions more at closing."

DEAL DETECTIVE

The Hidden Pattern in Premium Exits

One M&A advisor I spoke with has worked on over 200 transactions. When I asked what separated the top-quartile exits from the average ones, he didn't hesitate.

"It's the owners who approach their business like buyers years before they sell," he explained. "They audit their operations through the eyes of a skeptical investor and fix the issues that would reduce valuation."

US M&A multiples: Companies sold for higher prices in 2024 than they did in 2023, showing buyers were willing to pay more for quality businesses.

This insight was reinforced when I spoke with a due diligence specialist who works for PE firms. She evaluates dozens of companies each year and sees the same value-killers repeatedly:

"Customer concentration, founder dependence, and inconsistent financial reporting are the trifecta of valuation reduction," she noted. "Yet these are all fixable with enough lead time."

The businesses commanding premium multiples weren't just operationally sound, they had deliberately structured themselves to be acquisition-ready.

A third-generation family business owner told me how he spent two years building redundancy in leadership, diversifying his customer base, and upgrading financial systems before approaching buyers.

"We had five competing bids and sold for 11.6x EBITDA in an industry where 7-8x is typical," he shared. "The investment bankers told us our 'buyer-ready' approach was the difference."

VALUE VAULT

Capture Private Equity Returns Before You Exit

Based on conversations with industry leaders at ACG, here are three specific strategies business owners can implement to capture the value PE firms typically create post-acquisition:

A respected operating partner explained how his firm evaluates every acquisition: "We look at people, processes, and systems through the lens of scalability."

What you can do now: Commission an objective assessment of these three areas by someone with PE experience. Don't just focus on what's working, identify what would prevent your business from growing 3x its current size without your constant involvement.

"One manufacturing owner hired our firm to conduct the same operational assessment we do for PE clients," a consultant told me. "He spent 18 months implementing our recommendations, then sold for 40% more than comparable businesses in his space."

PE firms arrive with detailed 100-day plans after acquisition. These plans identify quick wins and structural improvements that drive immediate value.

What you can do now: Develop your own 100-day value creation plan, then implement it yourself 12-18 months before selling. This demonstrates both the opportunity and your ability to capture it.

"We were planning to grow through acquisition after selling a stake to PE," one CEO shared. "But our banker suggested we make our first acquisition before going to market. That one move added almost 2x to our multiple because it proved our roll-up strategy worked."

Data has become central to premium valuations. PE firms want evidence that key business decisions are driven by metrics, not intuition.

What you can do now: Invest in better reporting and analytics capabilities. More importantly, document how these insights drive business decisions and improvements.

"The difference between the companies we pay top dollar for and the rest often comes down to data sophistication," a PE operating partner explained. "We need to see that the metrics that matter are being tracked and acted upon systematically."

Stay rebellious,

kinza

p.s. you can find a free value creation playbook and template at the end here. It’s pretty killer.

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