A private equity buyer conversation
A private equity approach may involve a full sale, majority recapitalization, minority investment, rollover equity, continued employment, acquisition debt, and a future second transaction. Understand the architecture before reacting to the headline number.
The short answer
First identify who is actually approaching: the fund, a portfolio company, an independent sponsor, a search fund, an intermediary, or another capital source. Ask what the buyer wants to own, how the transaction is expected to be financed, what role the owner will have, how rollover equity works, and what approvals remain.
Private equity can create liquidity and a new growth partner. It can also leave the owner with concentrated, illiquid equity and substantial continuing obligations. Model the first closing and the life after it—not an assumed second payday.
Ask for the legal entity, fund or sponsor, portfolio company involvement, investment mandate, available or committed capital, relevant acquisitions, and who has authority to approve the transaction. A recognized brand does not answer which fund or entity will sign.
A full sale, majority recapitalization, and minority investment create different control, governance, liquidity, and future-exit questions. Ask what the buyer expects to own at closing and which rights remain with the seller.
Rollover may preserve participation in future value, but it is not cash. Review the entity being owned, valuation, security class, dilution, distributions, governance, information rights, transfer limits, future capital requirements, and what must occur before liquidity is possible.
Employment, consulting, board service, incentive equity, noncompetition, transition assistance, personal guarantees, performance targets, and termination rights can determine whether the owner is truly exiting or beginning a different job.
Acquisition financing may affect cash flow, investment capacity, covenants, distributions, and risk. Ask what debt is expected at closing, who the borrower will be, whether the owner retains exposure, and how the capital structure supports the operating plan.
The buyer may describe a future exit, recapitalization, or larger platform value. Treat that as uncertain until the documents, economics, governance, and risks are understood. The first transaction should work without requiring a perfect second outcome.
Before comparing the proposal
Show what the buyer, owner, management, and other investors own; which entity holds the business; and which securities each party receives.
Separate debt repayment, taxes, fees, escrow, cash at close, rollover, seller financing, earnout, and employment-linked compensation.
Identify board rights, reserved matters, budgets, distributions, hiring and firing authority, termination provisions, noncompetition, and the owner’s expected time commitment.
Ask what happens if growth slows, leverage constrains the company, an add-on fails, employment ends, more capital is required, or the anticipated second transaction is delayed.
Primary sources
A direct starting point
Use the guided journey to organize the questions—or tell us directly what is in front of you.