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A sale to private equity is not only about whether your business clears a buyer’s screen. It is also about whether that buyer is the right partner for your management team, culture, and expectations after the LOI is signed.
On Episode 317 of The Exit, host Steve McGarry talks with Sequoya Borgman, Founder and CEO of Borgman Capital, about the buy side of lower-middle-market M&A: what makes a company attractive, why preparation often takes years, and why sellers should diligence buyers with the same seriousness buyers bring to diligence.
Start with the buyer’s lens — then flip it
Borgman Capital is a leveraged-buyout firm focused on established lower middle-market businesses — often family- or founder-led companies taking on their first institutional investor. On air, Borgman describes a buy box roughly under $150 million in revenue and under about $20 million in EBITDA. Since founding the firm in 2017, he and his team have completed 22 company acquisitions; they look at roughly 1,500 opportunities a year and invest in only a handful.
Cash flow and LBO fit come first — then people. After the numbers narrow the field, evaluating the founder and management team is where they spend the most time: people are both the biggest risk and the biggest upside.
Make sure you vet that buyer as much as they’re vetting you.
Alignment matters once debt sits on a former lifestyle business. Understanding how the buyer makes returns — and walking when incentives do not match — is part of selling well, not only of buying well.
For the reader: Treat “attractive to PE” and “right buyer for us” as separate checks. Passing one does not prove the other.
Preparation is measured in years, not weeks
There is no perfect sell date, Borgman argues — especially for family businesses near a retirement or generational handoff. You sell when the business is ready. Getting there usually takes a couple of years: professionalizing operations and addressing risks a buyer would use to ding purchase price. In a softer deal market, holding longer can be rational; if the business is capitalizing on the current economy, exiting can still make sense.
For the reader: If a sale is on your horizon, start the operational and people work now. Waiting until process kickoff compresses the levers PE will underwrite.
People, culture, and post-close incentives
Most expensive mistakes Borgman has seen revolve around people: hiring wrong, partnering wrong, or staying misaligned. After an acquisition, his firm (like many PE shops) sets aside a meaningful equity stake for management to earn or invest in. Entrepreneurial operators, he says, can build life-changing — even generational — wealth when the investment works. Culture is a hard screen: they look for owners who care what happens after the check clears, not sellers who only want to cash out and disappear.
For the reader: Ask early how a buyer plans to retain and motivate the people who make the numbers true.
How the deal actually moves: LBOs and LOI to close
Borgman walks through a plain-language leveraged buyout: buy an established cash-flowing business partly with debt, pay that debt down from cash flow, and run a value-creation plan. He uses an illustrative example — a $50 million purchase with $25 million of debt and $25 million of equity, debt paid down over roughly five years — to show how leverage can roughly double equity value (he frames that as just under a 20% annual IRR) before operational improvement. That is teaching math, not a disclosed Borgman Capital deal price.
Once terms are agreed, signing an LOI and working to a purchase agreement is typically about a 90-day process — though the relationship may have been building for up to two years. Some deals close in about 60 days; after the LOI, the clock is on for bank term sheets and equity.
For the reader: Budget bandwidth for the LOI-to-close window. Treat buyer behaviour there as evidence for whether you chose well.
Market context: valuations, private credit, longer holds
A common misconception, Borgman says, is that PE’s default move is cutting headcount. He claims that across 22 acquisitions his firm has not done that; the playbook he describes is investing in people, benefits, systems, and software. On today’s market, he still sees a seller’s market for great assets, but argues a decade of PE and private credit capital pushed multiples that only worked if someone paid more later. Assets bought in 2021–22 at stretched prices are often underwater on paper, so many sponsors hold three to five more years. His firm uses little private credit and prefers bankable structures.
What this episode is — and is not
This is a buy-side expert interview — not a disclosed founder exit with a named sale price or multiple. Use it for screens, prep horizon, two-way vetting, incentives, and process. The $50 million LBO figures above are his worked example, not Flippa listing comps or a completed guest exit.
Takeaways for owners weighing a PE process
- Know who you’re selling to — vet the buyer as carefully as they vet your numbers.
- Treat exit prep as a multi-year project around cash flow, management, culture, and risks that ding price.
- Ask how management wins after close; equity alignment and culture hold the deal together.
- Understand LBO and LOI-to-close mechanics (including a typical ~90-day confirmatory stretch).
- Update your market framing for stretched valuations and longer holds — and walk away when the partner is wrong.
Listen, then check your readiness
Find Sequoya Borgman and Borgman Capital at borgmancapital.com and on LinkedIn. Accredited investors can also explore the firm’s Pass the Hat platform (mentioned on-air).
Weighing whether your business is ready for a buyer conversation? Start with a clear-eyed view of value — try Flippa’s free valuation estimate — then decide whether the next step is more prep or a real process.
Episode 317 of The Exit podcast — guest Sequoya Borgman, Founder and CEO of Borgman Capital. Companion article refreshed from the Riverside transcript.
