How private equity trends are influencing business sales

Opinions expressed by Digital Journal contributors are their own.

Today’s economic conditions and the amount of committed capital held by private equity firms may influence the options available to some business owners considering a sale.

While uncertain economic headlines may give the impression that it will be hard to sell a company in today’s business climate, private equity firms continue to hold substantial amounts of committed capital for investment. However, market conditions and outcomes can vary considerably by company, industry, and transaction.

For Richard Waryn of Ridgefield Partners, this dynamic may affect valuations, deal structures, and the options available to owners exploring a full sale or partial exit.

Why private equity is competing for business

According to Waryn, roughly 17,000 private equity firms globally are competing for business. With approximately $1.5 trillion in committed but uninvested capital waiting to be deployed, this may create pressure for firms to identify suitable investments, particularly because private equity funds generally operate within finite lifespans. 

With these realities in mind, Ridgefield Partners works with business owners considering full or partial sales.

“We do what’s called lower middle market mergers and acquisitions,” Waryn shares. “We operate on the sell side, which involves selling an entire company, or partial sales, which can help a founder continue working while contributing to the seller’s market.”

Advising lower middle-market businesses

Ridgefield Partners operates as a sell-side mergers and acquisitions advisory firm serving lower middle-market businesses.

“We approach every mandate with a structured, rigorous methodology informed by our perspective and refined across hundreds of transactions,” the company’s website shares. “We combine that operating know-how with deep experience in raising and investing private equity funds.”

According to the company, its advisors help clients understand the stages and considerations involved in a potential sale. Ridgefield Partners also says its senior advisors have experience building, scaling, and selling businesses, giving them familiarity with the process from an owner’s perspective.

The firm also uses an AI-supported Quality of Earnings tool to assist with financial analysis during the transaction process. Such assessments may help prospective buyers and sellers examine a company’s reported earnings, although the scope, cost, and duration of the analysis can vary depending on the business and transaction.

Factors influencing today’s business-sale market

As more business owners reach retirement age, some observers expect a growing number of middle-market companies to be offered for sale. At the same time, private equity firms’ available capital may contribute to interest in suitable businesses. The effect of these trends will depend on factors such as a company’s financial position, industry, growth prospects, and potential buyers.

A business entering the market is not automatically guaranteed a premium valuation or a successful transaction. Waryn says Ridgefield Partners helps owners analyze their businesses, discuss possible transaction structures, and navigate the sale process. Whether a full or partial sale is appropriate ultimately depends on the individual owner’s circumstances, objectives, and professional advice.