What You Should Expect Before Beginning the Private Equity Process

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1. Feature: What You Should Expect Before Beginning the Private

   Equity Process (5 min read)

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Private equity firms love small and mid-sized businesses with loyal customers, recurring revenue, and tight operations. If you’ve been approached, it can feel flattering—like validation for years of hard work.

But flattery doesn’t close deals. Selling to a PE firm is a long, grinding process that can distract your team, strain your cash, and still fall apart in the eleventh hour. This guide lays out the real timeline, the real cost, and the real questions to ask—starting with the one too many SMB owners skip.

The Most Important Document: The LOI

Most owners treat the Letter of Intent (LOI) as a formality. It’s not. The LOI is the fork in the road—either you have a real deal to chase, or you're about to lose time, money, and momentum chasing smoke.

A good LOI is precise. It covers price, timing, structure, roles, and key risks. If it’s vague, you’re signing up for arguments later. Worse, once you enter exclusivity, your leverage is gone.

Bottom line: Don’t sign an LOI unless you’d be willing to close on those terms. And don’t assume “non-binding” means “no consequence.” It locks up your time either way.

The Timeline: What Selling Actually Looks Like

Below is the typical PE acquisition timeline. Keep in mind: these aren't passive stages. They demand active effort from you and your team.

Even in best-case scenarios, you’re looking at 6–9 months. And that’s assuming no surprises, no holidays, and no “let’s circle back next quarter.”

Distraction: The Deal’s Hidden Tax

This process doesn’t run in the background. You’ll be in data rooms, meetings, and document reviews. So will your CFO, ops manager, and legal team—if you have them.

Meanwhile, customers still expect service. Products still need shipping. Sales still need closing. Diligence doesn’t pause operations; it competes with them.

Estimate: You’ll lose the equivalent of 1–2 full-time employees for months. For lean SMBs, that’s not a cost—it’s a threat.

When Deals Die

Roughly 20% to 30% of PE deals fall apart after the LOI. Valuation gaps. Red flags in diligence. Buyer fatigue. Changed priorities.

When that happens, you’re left holding the bag—tired team, legal bills, and lost momentum. If sales dipped or customers got spooked, you could even come out behind.

This is why a strong LOI matters. If the buyer won’t commit on paper, don’t hand over your team and calendar.

Reimbursement: Sometimes Promised, Sometimes Paid

Many PE firms offer to reimburse diligence-related costs—legal, accounting, advisory fees. Accounting guidance allows it. It’s common. But it’s not guaranteed.

Some firms reimburse only post-LOI costs. Some only reimburse if the deal closes. And some exclude anything they see as benefitting themselves more than you.

Advice: Push for clear, written terms on reimbursement—before you sign exclusivity. If you're taking a risk, the least they can do is cover the bills.

The Bigger Question: Is It Worth It?

Don’t mistake attention for alignment. Not every inquiry deserves your time. Ask yourself:

• Are the terms fair, specific, and actionable?

• Can your business afford the distraction?

• Is the buyer real—and ready?

• Can you walk away if the deal fails?

• Is the overall deal worth the dilution?

A PE sale can be life-changing. It can also be a 9-month detour to nowhere. Don’t start unless the road is worth it.

Your Playbook: How to Stay in Control

If you decide to explore a deal, here’s how to protect your business and sanity:

1. Get Organized Early
   Prep your financials, contracts, org chart, and compliance docs before anyone asks.

2. Negotiate the LOI Like It’s Binding
   Push for specifics on structure, payout, timelines, and cost reimbursement. If they won’t commit now, they probably won’t commit later. What happens if you don’t hit your projected numbers next quarter while your team is distracted?

3. Limit Exclusivity
   If they want 90 days, ask what they’ll deliver by day 30. Add milestones. Add teeth.

4. Protect the Team
   Don’t over-disclose too soon. Keep the business focused. No one works well in limbo.

5. Budget for Reinforcements
   You may need part-time finance help, legal support, or operational backup. Budget for it now, not later.

6. Have a Reboot Plan
   If the deal collapses, be ready to refocus, rally your team, and get back to growth.

Final Thought: It All Comes Down to Alignment

Selling your business isn’t about “seeing where this goes.” It’s about knowing what you want, what the buyer wants, and whether there’s a deal worth chasing.

If the LOI reflects shared reality—not just shared hope—then you're in business. 

If not, save your cash, the trouble, and keep building. The right buyer will find you when you're truly ready.

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