Blog: Preparing a Middle-Market Company for a Future Private Equity Sale

For owners of middle-market businesses considering a future sale to private equity, preparing for an eventual transaction involves more than simply growing revenue and EBITDA. Buyers may also evaluate the quality of management, recurring revenue and customer relationships, opportunities for operational improvement, proprietary data and technology, and the company's ability to continue growing following an acquisition.

Increasingly, technology and artificial intelligence are becoming part of that evaluation. The important consideration, however, is not simply whether a company "uses AI," but whether its technology, data and operating systems produce measurable financial results, improve scalability or create competitive advantages that a buyer can continue to build upon.

Middle-market private equity investors frequently evaluate businesses not only on historical performance, but also on what the company can become under new ownership. For sellers, identifying and developing these areas well before beginning a sale process can help buyers better understand both the existing value of the business and its opportunities for future growth.

Preparing a company for sale, therefore, should not begin when an investment banker is hired or a buyer submits an indication of interest. Ideally, it begins years earlier by building the financial, operational and strategic characteristics that sophisticated buyers will ultimately evaluate.

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