Insights & Info

Insights > Do Private Equity Firms Invest in Small Companies?

Do Private Equity Firms Invest in Small Companies?

By Generational Equity

pe invest in small companies

We are asked the question in the title of this piece quite often at our exit planning seminars. Because it is an area of interest for most business owners, we spend time on it in the teaching we do on the merger and acquisition (M&A) process. And even though we know equity firms are interested in lower middle-market companies because they tell us so (we have more than 34,000 registered buyers in our buyer database – buyers who have told us exactly what their investment criteria are), the data continues to amaze us.

The latest research from PitchBook* illustrates my point:

*PitchBook is a leading research company focusing on private equity and venture capital firms.

As you can clearly see, right before the recession hit in 2008, mega deals became very popular (and unwise in hindsight), causing the percentage of deals acquired by equity firms valued below $100 million to drop to around 60%. Post-recession, though, we are seeing a completely different story with deals in this range making up nearly 70% of all transactions last year.

The biggest increase can be found in deals closed below $25 million in value. Last year that range was around 45% of all transactions closed by equity firms. Think about that for a moment … nearly half of all deals closed by equity firms last year were small deals!

Again, even though we know this from experience, the data is amazing, and because it is not widely publicized, the small business community is largely unaware of this ongoing trend. For this reason, we hold M&A workshops: To make sure that every entrepreneur who is considering selling his/her company is aware of all their options, including selling to PEGS (private equity groups).

If this is news to you, attending a Generational Equity exit planning/M&A seminar would be very helpful.

What You Need to Know

Of course, not every smaller privately held company is a logical target for a PEG. These professional buyers have very specific guidelines they use for their investments. Industry, location, company growth trends, opportunities for expansion, company strengths, solid middle-management, lack of customer concentration – these are just a few criteria they tell us that they are looking for when we meet with them.

And this is another really good reason for you to attend one of our seminars: Your business today may not be “buyer ready” right now. We will give you ideas and concrete steps to follow that will in a relatively short time position you to be more attractive to these types of buyers.

But certainly, as we discussed a couple of days ago, more and more equity firms are using an add-on strategy to expand. Time and space do not allow me to delve into the description of how the add-on system works; however, suffice to say one of the reasons small transactions are now accounting for a larger piece of the M&A pie is because equity firms understand that acquiring and building a smaller company is far less risky than investing billions in the hopes that one transaction works out.

Naturally knowledge is key when considering the sale of your business. Fortunately, you have two options you can pursue:

  • Review our complimentary whitepaper library and download any piece there that you want to read
  • Attend a Generational Equity M&A seminar (again complimentary and no-obligation on your part)

Why do we believe so passionately in educating the small business owner about his/her options? Because based on our research, the sheer volume of businesses changing hands during the next 5-10 years will be unprecedented due to the baby boomer retirement explosion. We firmly believe that most business owners are woefully unprepared when it comes to exit planning, which gives buyers all the advantages in the acquisition process. Generational Equity, as its name implies, is dedicated to helping entrepreneurs learn how to release the generational equity that is contained in the business. And this is vital since for most families, nearly their entire net worth is tied up in the business.

To find out if attending one of our seminars makes sense for you and your company, please call us at 972-232-1121, fill out a contact form, or spend some time on our website to learn the typical agenda we follow at our seminars.

No matter what, do yourself a favor and research best practices in selling your company long before you approach buyers. It could save you millions!

Carl Doerksen is the Director of Corporate Development at Generational Equity.

© 2021 Generational Equity, LLC All Rights Reserved

Make an informed decision

The best decisions in life are informed decisions. We release educational business insights like this every week. Subscribe to make sure you don’t miss the latest news, views and analysis.


Success, you have been added to our list.

I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.
Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
We were represented by Michael Goss with Generational. The due diligence was grueling and exhausting, but Michael propped us up and kept us motivated throughout the process. Debi and I continued to ask each other how we could possibly make it through this process without the assistance of Michael. Michael's professionalism and knowledge is absolutely amazing, and we are so blessed to have had him by our side as we made our future dreams come true.
Bob and Debi Lee, Owners of BL Technology, Inc and BL Tl Services, LLC
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.
Robert Evans, President and CEO of Mealtracker Dietary Software
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.
Terry D. Wickman, President, Keytroller
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.
Andy Graham, Vice President, Modern Heating & Plumbing
After attending a conference with GE, I decided that the value they bring would be worth the expense and as soon as I started working with them, I realized that was the right decision. When we started to get LOIs, Fred Zweifel took the lead on the communication and supported negotiations throughout the process, which got tricky as we moved forward. I learned that it can be common for companies to make a great offer then work to erode that price with their discoveries, but Fred and the GE team kept that from happening.
Caroline Connelly, CEO, OptoTest
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.
Ralph Noblin, President of Noblin & Associates
Generational Equity’s assistance was invaluable in compiling and marketing our business.
Bil MacLeslie, CEO, ipHouse
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).
Bil MacLeslie, CEO, ipHouse
We had the pleasure of working with Mr. Ahmad Behjati Managing Director, M&A, for Generational Equity during our acquisition of Papa's Dodge in late 2021. Generational Equity and Mr. Behjati represented and marketed Papa’s Dodge. As our primary contact, Mr. Behjati was professional in every facet of this acquisition process, conveying valuable advice most times and assisting us in every step of the process.
Rick Greene of Dobbs Equity Partners LLC
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.
Pete L.
We thank you Eric and Generational Equity making our dream come true.
Larry Moore, Owner, A Company Portable Restrooms
T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.
Bryan D. Horn, Owner, Over Under Clothing
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.
Robert Evans, President and CEO of Mealtracker Dietary Software
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.
Jay Dinnison, Owner of Sharpe Mixers
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
The most important contribution I think Ahmad made was with his personality and work ethic. He is sincere, efficient, and very hard working. He was available to me at all times, whether it was for specific detail of the negotiation or just to talk through the bigger picture. He listened, advised, and recommended, but never forced his idea or opinions. In the time we worked together, he became a valued colleague and also a friend.
Salvo Stoch, Founder and CEO of Sleeping Partners
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.
Larry Moore, Owner, A Company Portable Restrooms
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.
Terry D. Wickman, President, Keytroller
I wanted to take this opportunity to thank you for all that you have done for us. Not only did you take care of all the aspects of the sale but took extra care to make sure we knew what it looked like every step of the way. I will definitely recommend your company to anyone that is in a position to or looking to exit their business.
Shane and Johanna Kline, Owners of Vision Upfitters
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.
Bil MacLeslie, CEO, ipHouse
The professionals at Generational Equity then helped develop a roadmap for enhancing the value of the firm and an evaluation report. This was completed by June 14, 2021. We then developed the Confidential Information Memorandum and put Taylor Studios, Inc. on the market by July.
Generational Equity’s professional staff helped me every step of the way. Their network and professionals are the only reason I sold my company this quickly. For me this is a once in a lifetime sale and I was unfamiliar with the process. I was able to lean on them with questions and concerns.
Betty L. Brennan, President, Taylor Studios
Thanks to you, the entire GE team and especially Michael Goss for driving a great valuation, coaching me and driving the process across the finish line. Please let me know if there is anything I can do to support GE going forward.
Tom Currier, Former President & CEO, Rackmount Solutions
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.
Jay Dinnison, Owner of Sharpe Mixers
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!
Eric Erlandson, Owner, Action Fastenings, Inc.
Through the sale process, Generational brought in several interested buyers and we closed in about 6 months. I am so glad I accepted that invitation to the conference and could not be happier with the whole process. The team at Generational coupled with their knowledge and guidance was so valuable that in the end, I know I could never have done this on my own!
JoAnn Ellis, Owner of Fondren 5 Star Kennels
I decided to attend the conference and hopefully receive some guidance on how to structure an exit plan of my business. Upon arriving at the conference, I was so impressed with the presentation given by Generational Equity that I set a future appointment that week to discuss the possibility of selling my business with their Senior Managing Director David Robinson.
JoAnn Ellis, Owner of Fondren 5 Star Kennels