Launch a Private Equity Portfolio Company

A wave of retiring owners is selling profitable boring businesses, and buyers with capital and operating skill are still scarce.

1. 1

   Define an acquisition thesis

   One sector, one size band (say, home services companies with $500K to $2M in earnings), and a reason you can run them better. A thesis is what attracts capital and deal flow.

2. 2

   Arrange your capital base

   Self-fund, raise from investors, or use SBA 7(a) loans (up to $5 million per deal with roughly 10 percent down). How you fund the anchor deal shapes everything after it.

3. 3

   Build proprietary deal flow

   Work business brokers and listing sites like BizBuySell, but also write directly to retiring owners in your sector. Off-market conversations produce the best prices.

4. 4

   Underwrite and sign an LOI

   Value on a multiple of adjusted earnings (often 3 to 5 times for small companies), stress-test customer concentration, and lock terms in a letter of intent.

5. 5

   Close the anchor acquisition

   Run full financial, legal, and operational diligence, structure the deal with sensible debt and a seller note, and keep the seller on through transition.

6. 6

   Operate, then bolt on

   Stabilize the anchor company, install reporting and shared back-office functions, and only then buy the second business. Integration discipline is what makes roll-ups work.