24 Mar Private Equity vs. Strategic Buyers: Who Pays More and Why?

What You Don’t Know About Selling Your Business Could Cost You

You’ve spent years—maybe decades—building your business. Countless hours, sleepless nights, and sacrifices have gone into making it what it is today. Now, you’re finally thinking about selling. It should be your big payday, your reward for all that hard work. 

You’ve heard private equity buys businesses.  Maybe they’ll buy yours?  Maybe a competitor will buy?  Or maybe even someone else not on your radar yet?

But here’s the harsh truth: buyers aren’t looking out for you. They’re looking for the best deal—for them. They’ll poke holes in your valuation, drag out negotiations, and slip in terms that could leave you with far less than you expected.  Worse?  If you don’t structure the deal properly, you could still be on the hook for liabilities years after you walk away.

One misstep in the process—one overlooked contract clause, one seemingly minor concession—and the deal you thought would set you up for life could end up draining your bank account instead.

Are you 100% sure you know how to protect yourself?

Before you sign anything, before you assume this will be a smooth exit, you need to know what’s really at stake—and how to make sure you win this deal, not just survive it.

Here’s what you need to know to sell your business the right way…

Private Equity Versus Other Buyers:  What’s the Difference?

When you’re selling your business, there are two main types of buyers you’ll run into: Private Equity (PE) firms and Strategic Buyers (aka other companies in your industry). The question is—who will pay you more?

The answer? It depends on how well you position yourself. Get this wrong, and you could leave millions on the table. Get it right, and you could maximize your exit price while structuring a deal that actually benefits YOU.

The Private Equity Playbook

Private equity firms are financial buyers. They’re looking for businesses that generate steady cash flow so they can buy, grow, and eventually resell at a higher valuation—typically within 3-7 years.

What does this mean for you?

✔ They focus on EBITDA (earnings before interest, taxes, depreciation, and amortization). The higher your EBITDA, the more they’ll pay.
✔ They often structure deals with rollovers, meaning they want you to keep a minority stake in the business so you share the risk.
✔ They LOVE businesses that can run without the owner—if you’re too involved in day-to-day operations, expect a lower offer.

When PE Pays More:

✅ If you have strong financials with predictable recurring revenue.
✅ If your industry is consolidating and they need a strong platform acquisition.
✅ If you’re willing to stay on for a few years and help grow the company for a second, bigger payday.

BUT BEWARE: PE firms NEVER overpay. Their job is to get the best return for their investors. They WILL negotiate you down, structure earnouts, and use debt to reduce their risk. If you’re looking for a clean break and top dollar upfront, they may not be your best buyer.

The Strategic Buyer Advantage

Strategic buyers aren’t just looking at your revenue—they’re looking at synergies. They want to acquire your customers, your products, or your market share to make their own business more valuable.

What does this mean for you?

✔ They may pay a premium if your company fills a gap in their business.
✔ They often eliminate redundancies, meaning they might cut staff (or even you) post-acquisition.
✔ They don’t need you as much as they need what you’ve built—this can be great if you want to exit quickly.

When Strategic Buyers Pay More:

✅ If your business gives them an instant competitive advantage (tech, IP, customer base).
✅ If acquiring you is cheaper than building what you have from scratch.
✅ If they can eliminate duplicate costs, making the deal more profitable for them.

BUT BEWARE: Strategic buyers move slower than PE firms. They’re often large corporations, which means bureaucracy, endless approvals, and deal fatigue. If you don’t have the stomach for long negotiations, this can be a frustrating process.

Who Should You Sell To?

If you want to maximize valuation, you need BOTH types of buyers at the table. Why? Because competition drives up price. If a PE firm knows a strategic buyer is bidding,

they’ll stretch further. If a strategic buyer knows PE is interested, they’ll sharpen their pencil.

The key to getting top dollar is knowing how to position your company for the right buyers—before you ever start negotiating.

Want to learn how the smartest business owners sell for maximum value?  Talk to us.