What to Do If Offered an Acquisition Offer by Private Equity Firm

If you are asking what to do if offered an acquisition offer by private equity firm, the short answer is do not sign the NDA or exclusivity, do not send financials, and do not name a price for at least 10 business days while you assemble a sell-side advisor, a Quality of Earnings firm, and an M&A attorney. Unsolicited preemptive offers from private equity close at prices 15-25% below what a competitive process produces, according to Capstone Partners’ 2026 Lower Middle Market Survey, and the founders who win this conversation are the ones who slow it down, run a controlled auction, and force the PE firm to bid against three or four other qualified buyers.

Context: Why This Question Matters

Unsolicited private equity inbounds have become the default first contact between a profitable lower-middle-market business and the deal market. Axial reported in 2026 that PE platforms and their portfolio companies sent more than 1.3 million proprietary outreach emails to founders during 2025, a 41% jump over 2023. The bait is the same every time: a friendly partner email, a flattering reference to growth or margins, a vague valuation range, and a request for a 30-minute call plus a one-page summary of financials. The pitch is designed to skip the auction, lock the founder into a 12-24 month exclusivity, and land the deal 15-25% under fair market clearing price.

The owner who treats the inbound as a single buyer negotiation almost always loses on price, terms, and post-close governance. The owner who treats the inbound as proof that the asset has institutional demand, and then runs a process to monetize that demand, captures a materially higher price plus better protections on rollover equity, earnout, and continued employment.

The Detailed Answer

Step 1: Stall on documentation until you have an advisor. The first ask from a PE firm is almost always a mutual NDA followed by three years of financials and a teaser of revenue, EBITDA, customer concentration, and growth. Do not send any of it. The NDA the buyer drafts almost always contains a no-shop provision (often 90 to 120 days, sometimes a 12-24 month exclusivity tail) that quietly blocks you from talking to any other buyer. SRS Acquiom’s 2025 deal terms study found exclusivity periods averaged 90 days in competitive processes but ballooned to 6-12 months in proprietary one-on-one deals, and exclusivity time directly destroys competitive tension.

Step 2: Do not anchor a price. The single most expensive thing a founder can do on the first call is answer the question “what are you looking for?” Capstone Partners’ 2026 Lower Middle Market Survey reported that founders who name a price in initial unsolicited PE conversations anchor 30-50% below the eventual market clearing price. The right answer is “we are not actively selling, but we are willing to consider written indications of interest from qualified buyers running through our advisor.” Then make the buyer move first.

Step 3: Identify what kind of PE firm is calling. The label “private equity” covers buyers with very different mandates, hold periods, and price discipline. Lower middle market PE firms ($10-100M EBITDA targets) include Tinicum, The Riverside Company, Aperion Management, ICV Partners, Bertram Capital, Audax Group’s lower middle market fund, and Gauge Capital. Core middle market PE firms ($100M+ EBITDA) include Carlyle, KKR, Bain Capital, Vista Equity, and Thoma Bravo. Search funds (single-acquisition operator partners) pay below platform prices but offer continuity. Family offices pay roughly comparable to PE but with longer hold periods and less debt financing. Independent sponsors have no committed fund and must raise capital after signing the LOI, which introduces real close risk; founders should require proof of committed equity before granting any exclusivity to an independent sponsor. Our companion piece on How Buyers Evaluate Private Companies Before Making dives deeper into this topic.

Step 4: Determine if you are a platform or an add-on. A platform investment means the PE firm will keep the CEO and management team, invest in growth, and bolt smaller acquisitions onto your company over a 4-7 year hold. The seller typically rolls 15-35% of equity into NewCo for a second bite at the apple, which historically returns 1.5-3.0x at exit per Pitchbook data on GP-led continuation funds and re-trades. An add-on means the buyer already owns a platform in your space, and your company is being absorbed into it. Add-on deals are usually cleaner exits (more cash at close, less rollover, no continuing CEO role) but generally pay 0.5-1.0x EBITDA less than platform deals because synergies accrue to the buyer.

Step 5: Run a competitive process. The single biggest mistake in this entire playbook is accepting a preemptive offer without testing the market. SRS Acquiom 2025 data shows transactions with 3 or more qualified bidders cleared 12-18% above transactions with 1 or 2 bidders, and Capstone Partners’ 2026 survey put the gap at 18-24% in the lower middle market specifically. The mechanic is simple: hire a sell-side advisor, prepare a Confidential Information Memorandum, contact 40-100 qualified buyers (a mix of strategics, PE platforms, and PE add-ons with active mandates in your industry), collect 4-8 Indications of Interest, narrow to 2-4 LOIs after management meetings, then run a best-and-final round. The original unsolicited PE firm is invited to participate alongside everyone else.

Step 6: Know your 2026 multiples before you negotiate. Without a price anchor of your own, any number the buyer floats sounds reasonable. GF Data’s Q1 2026 report and BizBuySell’s 2026 Insight Report put current EBITDA multiples in the lower middle market at: home services (HVAC, plumbing, electrical, roofing) 5.0-9.0x, manufacturing 5.0-8.0x, distribution 5.0-7.0x, vertical software and SaaS 8.0-15.0x, managed service providers (MSP) 6.0-10.0x, healthcare services 7.0-12.0x, professional services (accounting, law, consulting) 4.0-8.0x, and specialty contractors 5.5-9.0x. Premiums apply for recurring revenue above 70%, customer concentration below 15%, and EBITDA above $5M.

Step 7: Invite strategic buyers, not just PE. Strategic acquirers (competitors, suppliers, adjacent industry players) historically pay a 0.5-1.5x EBITDA premium over financial buyers because they capture cost and revenue synergies a PE firm cannot. Capstone Partners’ 2026 data shows strategic buyers paid an average 8.4x EBITDA in the lower middle market against 7.1x for financial sponsors in matched transactions. The catch is that strategics move slower and tend to require more confidentiality protection because some of them will use diligence as an excuse to learn about your customers, pricing, and operations. A properly run process protects against this with staged information release.

Step 8: Build the team before you sign anything. The required roster: a sell-side M&A advisor (the only party with a real incentive to push price), a sell-side Quality of Earnings firm (CohnReznick, RSM, Baker Tilly, Aprio, or a regional equivalent), an M&A attorney with at least 25 closed transactions in your size range, a tax advisor or CPA who can model the F-reorg, 338(h)(10), or asset-versus-stock structure, and a wealth manager to model post-close personal cashflow. Founders who try to run this with their general business attorney and tax preparer routinely lose 5-15% of total proceeds to suboptimal structure.

Step 9: Understand the timeline. From engagement letter to closing wire, a properly run sell-side process for a lower middle market business typically takes 4-9 months: 30-45 days for sell-side QoE and CIM preparation, 30-45 days for buyer outreach and IOIs, 30-45 days for management meetings and LOI collection, then 60-120 days from signed LOI to close. Rushing under 4 months almost always means skipping competitive tension; stretching beyond 12 months risks buyer fatigue and deteriorating financials.

What Most Owners Get Wrong

Mistake 1: Signing the buyer’s NDA without redlining the no-shop clause. The boilerplate NDA the PE firm sends almost always contains an exclusivity tail of 90-365 days that prevents the seller from talking to any other buyer. Strike the no-shop entirely or limit it to 30 days post-LOI. Your attorney should be the one who reviews and counters this, not you.

Mistake 2: Sharing detailed financials before signing an engagement letter with a sell-side advisor. Once the buyer has your full QuickBooks file and three years of tax returns, you have lost most of your information asymmetry. A proper sell-side process releases information in tranches: teaser (no name, no customer list), CIM under NDA (full financials, customer concentration redacted), management presentation (operations and growth detail), and finally data room access (everything else) only after an LOI is signed at an acceptable price.

Mistake 3: Believing the “we move fast and quietly, you save banker fees” pitch. The pitch is true in the sense that one-on-one deals close faster and cheaper. The pitch is false in the sense that they almost always close at a 15-25% discount to a competitive process. A 1.5% to 5% sell-side advisor fee on the incremental price lift is a 4-8x return on the fee itself. The math almost never works in favor of accepting the proprietary deal at the proprietary price.

Mistake 4: Underestimating independent sponsor close risk. Independent sponsors do not have committed fund capital; they raise equity after the LOI is signed. Their close rates run materially below committed PE funds. If an independent sponsor is the buyer, require proof of capital commitment letters from named LPs before granting any exclusivity, and shorten the exclusivity window to 60 days maximum.

How CT Acquisitions Approaches This

CT Acquisitions runs a buyer-paid sell-side process for lower middle market business owners who have received unsolicited PE inbounds and want to test the market without paying a banker out of pocket. The acquiring party pays our fee at close, which means we have direct economic incentive to drive total consideration as high as possible. Sellers pay zero.

The typical engagement starts with a free read on the unsolicited offer (is it serious, is the buyer well-capitalized, is the price in range), then moves to a pre-LOI sell-side Quality of Earnings report through one of our partner firms, and then a targeted outreach to 40-100 qualified buyers including the original PE inbound. We require multiple LOIs before any seller signs exclusivity, and we manage the bid comparison matrix and best-and-final round. Sellers who came in with one unsolicited PE offer and ran our process closed at an average 18-24% higher final purchase price than the original number, and with materially better protection on rollover, earnout, and post-close governance.

Related Questions

Should I respond to an unsolicited PE inbound at all?

Yes, but only with a generic “thank you for the interest, we are not actively selling but are open to written indications of interest routed through our advisor.” Do not sign their NDA. Do not send financials. Do not name a price. The inbound is useful market intelligence, and engaging it correctly is the trigger to call a sell-side advisor and quietly test whether a real process makes sense in the next 6-9 months.

How much should I expect a PE firm to pay for my business in 2026?

The 2026 EBITDA multiple ranges per GF Data Q1 2026 and BizBuySell 2026 are: home services 5.0-9.0x, manufacturing 5.0-8.0x, distribution 5.0-7.0x, vertical software 8.0-15.0x, MSP 6.0-10.0x, healthcare services 7.0-12.0x, professional services 4.0-8.0x. Premiums apply for recurring revenue above 70%, customer concentration below 15%, and EBITDA above $5M. Strategic buyers typically pay 0.5-1.5x EBITDA above financial sponsors in matched deals.

What is exclusivity and why does it matter?

Exclusivity (also called a no-shop) is a contractual period during which the seller is barred from negotiating with any other buyer. Standard competitive processes cap exclusivity at 60-90 days post-LOI; proprietary unsolicited deals often try to push it to 6-12 months. Long exclusivity destroys competitive tension and is the single largest tool a buyer has to re-trade price during diligence. Sellers should refuse any exclusivity longer than 90 days, and ideally require a breakup mechanism if diligence drags past 75 days.

What is rollover equity and should I take it?

Rollover equity is the portion of the purchase price the seller reinvests into the post-close NewCo, typically 10-35% in lower middle market PE platform deals. Rollover offers a second bite at the apple (a return on the new equity at the PE firm’s eventual exit, historically 1.5-3.0x per Pitchbook), but the equity is illiquid for 3-7 years at a valuation the buyer sets and governance is buyer-controlled. Rollover makes sense when the founder believes in the platform thesis and wants to stay; it is a poor choice when the seller wants a clean exit.

When should I say no to a PE offer entirely?

Say no when the price is below 80% of fair market clearing price after a competitive process, when the buyer demands exclusivity longer than 90 days, when rollover is mandatory above 35% of equity value, when the earnout exceeds 25% of headline price or runs longer than 24 months, when the buyer cannot show committed fund capital, or when the post-close employment terms strip the founder of operating authority on day one. Walking from a bad deal is almost always cheaper than closing it.

What to Do Next

If a private equity firm has reached out, the most expensive next move is signing their NDA and sending the financials they asked for. The cheapest and highest-return next move is a 30-minute call with a sell-side advisor to read the inbound, score the buyer, and decide whether to run a real process. Most owners who do this discover the unsolicited offer is 18-24% below what the market will pay, and a 5-7 month controlled process recovers the gap many times over.

Related reading: What to Do If I Have Multiple Offers When Selling My Business, What Are the Options for Selling My Company, Letter of Intent to Sell Business Sample, Book a Free Consultation.