A strategic acquirer buys you for what you do for them; a private equity fund buys you for what you can earn, geared and resold in three to seven years. This article explains how that changes the price, the paperwork and your own job after closing.
TL;DR
- Private equity pays for predictable EBITDA or rule-of-40 SaaS metrics, finances part of the price with debt, and plans to resell within three to seven years.
- A rollover of 10–40% of your proceeds into the new holding company gives you a second bite of the apple; price it and rank it carefully.
- Expect leaver provisions, a management incentive plan, a 100-day plan and covenants: you keep running the company, but the sponsor owns the clock.
- In 2025–26 median US buyout multiples sit around 11–12× EBITDA and private SaaS deals at a long-run median of about 4.5× revenue (about 3.8× in 2025), with equity funding roughly half the price.
When a founder says "we are talking to PE", they usually mean one of five very different conversations. A growth equity fund wants a minority stake and a seat at the table. A buyout fund wants control, debt in the structure and a plan to sell you again. A software specialist such as Thoma Bravo, Vista, Hg or EQT wants recurring revenue it can buy, bolt onto a platform and re-price. A take-private wants your listed shares at a premium. And a continuation fund or secondary buyout wants a company that has already been through all of this once.
What unites them is the arithmetic. A financial buyer underwrites to a return on equity, typically a 2.5× multiple of money or a 20%+ internal rate of return over the hold period. Bain's Global Private Equity Report 2026 notes that with borrowing costs at 8–9% a sponsor now needs roughly 10–12% annual EBITDA growth to hit that 2.5×, against about 5% in the 2010s. That gap is your negotiating leverage and your post-closing burden in one number.
This is the second of eight exit routes in the Kurums Founder Exit Playbook. It assumes you have read the valuation primer and the due diligence checklist. Here we focus on what is specific to a sponsor: how they price, how the rollover works with a worked example, what the legal pack adds, and what your life looks like once the 100-day plan lands on your desk.
Is this route right for you?
Best fit when
- You have positive EBITDA or SaaS metrics near the rule of 40, recurring or contracted revenue, and churn a lender can underwrite.
- You want partial liquidity now but believe the next five years of growth are worth more than today's multiple.
- There is no obvious strategic buyer, or the strategics want to swallow your brand and team and you do not.
Think twice if
- You are pre-profit, burning cash and dependent on the next funding round; a buyout fund cannot lever losses.
- You want to leave on closing day. Sponsors buy management teams and will discount hard for a departing founder.
- Your business cannot tolerate debt service: lumpy project revenue, concentration in one customer, or heavy regulatory capex.
Typical shape
| Deal size | $20M–$500M lower and mid market; $1B–$12B+ for take-privates |
| Who buys | Buyout funds, growth equity, software specialists, sovereign co-investors, continuation vehicles |
| Consideration | Cash at close, 10–40% rollover equity, occasional earnout or vendor loan |
| Leverage | Equity ~50% of price in 2025 (Ropes & Gray); 4–6× debt/EBITDA on larger deals |
| Founder stays? | Almost always as CEO or chair through the sponsor's 3–7 year hold |
What kinds of private equity buyers exist, and which one is talking to you?
Growth equity takes a minority stake, usually 20–49%, with preferred rights and a board seat. It is closest to a late venture round, but the fund underwrites to a defined exit and will push for a sale or IPO within four to six years. You keep control; you also acquire a shareholder with drag-along rights and a redemption clock. If you want liquidity for yourself rather than money for the company, a growth round often includes a secondary component covered in our secondary sale guide.
Majority recapitalisation is the classic founder deal in the lower and mid market. The sponsor buys 51–80% of the equity using a mix of fund equity and acquisition debt; you sell most of your shares for cash and roll the rest into the new holding company. You stay as CEO, the board flips to sponsor control and the business carries debt for the first time. This is the structure the rest of this article mostly assumes.
Full buyout and take-private are the same deal at different scale: 100% of the equity, often with management re-investing afterwards. Take-privates add public-company process, a shareholder vote, fairness opinions and sometimes an activist. Software specialists such as Thoma Bravo, Vista Equity, Hg, EQT and Francisco Partners run sector playbooks: buy a platform, add on smaller companies, standardise pricing and go-to-market, exit to a larger sponsor or the public market. If one of them calls, you are usually either the platform or the add-on; the price and the terms differ sharply between the two.
What does private equity actually want to see in your company?
Lenders set the floor. A buyout only works if a bank or private credit fund will lend against your cash flows, so the sponsor looks first at what debt your EBITDA can carry: recurring or contracted revenue, gross retention above 90% for software, customer concentration below 15–20% for any single account, and a cost base that can be flexed if growth slows. If your numbers are run-rate ARR with heavy discounting, expect the diligence team to rebuild them from invoices, as described in the diligence checklist.
For SaaS, the shorthand remains the rule of 40: revenue growth plus free cash flow margin above 40%. A company growing 25% at a 15% margin is fundable; one growing 60% at minus 40% is a venture story, not a buyout. Pricing power matters as much as growth, because the fastest EBITDA lever in a sponsor's model is a price increase in year one. Show historic price rises that stuck and net revenue retention above 110% and you will be modelled as a platform.
Finally, sponsors buy management. The investment committee memo will have a page on you, your CFO and your second line. A founder who is visibly tired, has no finance leader and runs the company from a spreadsheet gets a lower price and a heavier earnout, because the fund has to budget for hiring and risk. The preparation guide covers the twelve months of housekeeping that lifts that page.
What real exits teach: three cases
In February 2013 Michael Dell agreed to take the company he founded private with Silver Lake, at $13.65 a share later raised to $13.75 plus a special dividend after a proxy fight from Carl Icahn, who eventually called the battle "unwinnable". Dell contributed his roughly 14% stake and a substantial cash investment; Microsoft lent $2 billion and a bank group provided the acquisition debt. The transaction closed on 29 October 2013 at about $24.9 billion, per Silver Lake's completion release. Out of the public eye, Dell shifted from PCs toward enterprise infrastructure, bought EMC for $67 billion in 2016 and returned to the New York Stock Exchange in December 2018 by buying out the DVMT tracking stock for $23.9 billion. The founder emerged with a controlling stake in a far larger company and Silver Lake with one of the most profitable sponsor investments on record.
Zendesk was founded in a Copenhagen loft in 2007 by Mikkel Svane, Alexander Aghassipour and Morten Primdahl and listed in New York in 2014. In early 2022 the board rejected a roughly $17 billion private equity approach while pursuing a $4.1 billion acquisition of Momentive (SurveyMonkey), which shareholders led by activist Jana Partners voted down. A formal strategic review ended in June 2022 with the company vowing to remain independent; the stock fell sharply. Days later the board accepted $77.50 a share from a consortium led by Hellman & Friedman and Permira, about $10.2 billion and a 34% premium, but far below the February offer. The deal closed in November 2022 and Svane stepped down as CEO soon afterwards. Analysts quoted by TechCrunch read the sale as a release of pressure for a founder worn down by months of activism.
Visma, a Norwegian accounting and payroll software company, was taken private by Hg in 2006 in a deal valuing it at about £382 million. KKR bought in during 2010 and Cinven in 2014, each time alongside Hg. In June 2017 an Hg-led group paid NOK45 billion ($5.3 billion) of enterprise value for KKR's full stake and 40% of Cinven's, then the largest software buyout in Europe; management kept 7%. By then revenue had grown from NOK1.6 billion in 2006 to NOK7.9 billion and EBITDA from NOK240 million to NOK1.9 billion. In December 2023 a further round of secondary sales to roughly 20 new investors, including Jane Street and the NYC Retirement System, valued the group at €19 billion with Hg still the majority holder, according to tech.eu and Hg's own announcement. Visma has made hundreds of add-on acquisitions and is now more than 20 times its 2006 size.
How does private equity price a startup in 2025–26?
Sponsors price on EBITDA for profitable companies and on revenue for growth software, then back-solve to a return. PitchBook's Q2 2025 US PE Breakdown puts the median buyout EV/EBITDA multiple at 11.5×, down from 12.3× a year earlier. Ropes & Gray's Q1 2025 market recap records LBO purchase-price multiples of 11.7× against 11.0× for full-year 2024, with average equity contributions of 52% of the purchase price and rollover equity averaging 6% of deal value, up from 1–3% in the previous five years. Those averages hide a wide spread: lower mid-market services businesses change hands at 6–9× while scaled software platforms clear 15–20×.
For software, Aventis Advisors' 2026 update of its SaaS valuation dataset gives a long-run (2015–2026) median EV/revenue multiple of 4.5× across 543 SaaS M&A transactions and a 2025 median of about 3.8× on a smaller sample, against a median of 4.6× for listed SaaS companies at the end of August 2026. Take-privates can price at or below those medians: Thoma Bravo agreed to acquire PROS Holdings in September 2025 at $23.25 per share, about $1.4 billion and roughly 3.2× sales, a 42% premium to the unaffected price.
Leverage is the second half of the price. Bain's 2026 report describes borrowing costs of 8–9%, which is why equity now funds around half of a buyout rather than the 30–40% of the cheap-money years. For you, that means two things: the sponsor's model is more sensitive to EBITDA growth than to multiple expansion, and the debt sitting above your rollover equity is smaller than it would have been in 2021, which makes the second bite less of a lottery ticket. Ask to see the sources-and-uses table and the lender term sheet before you sign exclusivity; both tell you how much room there is in the price.
Net debt, working capital and the equity bridge
Sponsors negotiate enterprise value and pay equity value. Between the two sits the equity bridge: cash minus debt and debt-like items (deferred revenue haircuts, accrued bonuses, unpaid tax, earnouts owed on your own acquisitions, lease liabilities under IFRS 16) plus or minus the difference between closing working capital and an agreed normal level. A $100 million headline can become $88 million of equity once a buyer's accountants have classified customer deposits as debt-like. Fight each line, agree the working-capital peg on a twelve-month average, and insist that the definitions sit in a schedule you have modelled.
How does the rollover, the second bite of the apple, actually work?
A rollover means you do not sell all your shares for cash; you exchange part of them for equity in the sponsor's new holding company, usually tax-deferred where the jurisdiction allows (the US has specific rules under Section 351 and partnership structures; UK founders look at share-for-share relief; always check locally). The sponsor wants you to roll because it aligns you with its exit and reduces the cash it must fund. You should want to roll only if you believe in the plan and understand where your shares rank.
Worked example. Your company sells at a $100 million enterprise value with no debt. You own 60%, so your gross proceeds are $60 million. The sponsor funds the deal with $50 million of equity and $50 million of debt. You roll $12 million, 20% of your proceeds, into the new holding company and take $48 million in cash. Your $12 million buys 24% of a $50 million equity pot. Five years later the business sells for $250 million, debt has been paid down to $30 million, so equity is worth $220 million. Before management-plan dilution and fees, your 24% is worth about $52.8 million: a second bite nearly the size of the first, from a fifth of the money.
The example flatters the structure in one way: it assumes your rollover sits in the same instrument as the fund's money. Many European sponsors invest mostly through shareholder loans or preferred shares (the "institutional strip") yielding 8–12% a year, with only a thin layer of ordinary equity underneath. If your rollover goes into ordinary shares while the fund's money sits in preferred, the preferred coupon compounds ahead of you and a flat exit can wipe your stake out. Insist on investing pari passu in the same strip, and model the exit at 1×, 2× and 3× the entry value before agreeing the percentage.
Management incentive plans and sweet equity
On top of the rollover, sponsors reserve a management incentive plan, typically 8–15% of the fully diluted ordinary equity in the US and a "sweet equity" pool of similar size in the UK and Europe, bought by the team at a low price and worth a lot only if the fund hits its return hurdles. Negotiate the pool size, the vesting schedule (time-based for a third, performance for the rest is common), the hurdle rate, and what happens to unvested shares when the sponsor exits early. Dell's and Visma's management teams were paid largely through these instruments; so will yours be, long after your cash proceeds have cleared.
What the lawyers and the diligence team will examine
The legal workstream for a sponsor deal is heavier than a strategic sale on the seller's side, because you are not only selling but reinvesting. Alongside the share purchase agreement, you will negotiate a shareholders' agreement for the new holding company, a rollover or contribution agreement, a management incentive plan, a new service agreement with restrictive covenants and, in Europe, a warranty and indemnity insurance policy that replaces most of your personal exposure. Expect three sets of lawyers: the sponsor's, the company's and your own management counsel, which the company usually pays for up to a cap.
Diligence checklist
- Quality of earnings: a third-party accountant rebuilds EBITDA from the ledger, normalises one-offs and tests revenue recognition; the adjusted number drives the multiple.
- Debt capacity and lender diligence: the credit fund runs its own review of churn cohorts, customer concentration and cash conversion; a lender's doubt costs you price even if the sponsor is convinced.
- Cap table, options and preference stack: every instrument that converts or accelerates on a change of control, so the sponsor knows exactly what its equity buys.
- Customer contracts: change-of-control consents, termination rights, price caps and auto-renewal terms, because the value-creation plan assumes pricing power.
- Key-person dependency and management depth: who leaves, who stays, what their new contracts say, and whether the second line can run the 100-day plan.
- Working capital and debt-like items: twelve months of balance sheets to set the peg, and a hunt for deferred revenue, accrued bonuses, tax and lease liabilities to deduct from price.
- Regulatory and FDI screening: merger control thresholds, foreign-direct-investment reviews (UK NSIA, EU FDI Regulation, US CFIUS when a sovereign co-investor such as ADIA or GIC is in the consortium).
- Data, IP and open-source: ownership assignments from every founder and contractor, licence compliance and privacy exposure that could surface during the sponsor's own exit.
Deal terms that move money
- Rollover equity termsWhich instrument you receive, whether it ranks pari passu with the fund's institutional strip, your information rights, anti-dilution on later add-on funding, and tag-along rights on any partial sponsor sale.
- Good and bad leaverIf you leave early, a good leaver (death, disability, dismissal without cause) keeps shares at market value; a bad leaver (resignation, cause) may be bought out at the lower of cost or value. Define the categories tightly.
- Drag-along and tag-alongThe sponsor can force you to sell on its exit at the same price and terms; you can insist on joining any sale it makes. Check that drag cannot be used to crush your strip with a structured exit.
- Reps, warranties and W&I insuranceIn UK and European deals the buyer's W&I policy usually caps your liability at a nominal £1 or 1% of price for general warranties, with known issues excluded; CMS reports W&I use still rising in 2024. Fraud remains uninsured.
- Non-compete and non-solicitTypically two to three years from the later of closing or your departure, enforceable to varying degrees by jurisdiction; in the US several states limit them, so sponsors tie them to the sale of goodwill rather than employment.
- Earnout and vendor loanUsed to bridge price gaps, especially on add-ons; CMS found earnouts in nearly one in three German-speaking deals in 2024. Define the metric, protect it from allocation of group costs, and get it ranked above the sponsor's shareholder loans.
- Management service agreementYour new employment or service contract: notice period, bonus linked to the budget the sponsor sets, board role, consent rights over your removal, and how a change of CEO interacts with your leaver status.
General information, not legal or tax advice. Rules vary by jurisdiction; take advice from counsel in every country where you have an entity, staff or customers. See the series legal pillar: Due diligence and legal preparation.
What is life like under a sponsor: 100-day plan, board, debt and the next exit?
The deal closes on a Friday; the 100-day plan starts on Monday. Expect a monthly reporting pack with 30–60 KPIs, a board of five to seven people where you and perhaps your CFO are the only executives, an operating partner in the building for the first quarter, and a value-creation plan that already names the add-ons, price changes and cost actions the investment committee approved. None of this is hostile. All of it is faster than anything your venture board asked for.
The debt changes the rhythm of the company. Covenants, typically a leverage ratio and an interest-cover ratio tested quarterly, mean a missed quarter is no longer a conversation with investors but a conversation with lenders. Cash sweeps direct excess cash to repayment rather than to the next experiment. Capex above a threshold needs board approval. Most founders find the discipline useful and the loss of optionality painful; decide which you are before you sign.
Then there is the clock. Bain's 2026 report counts roughly 32,000 unsold portfolio companies worth about $3.8 trillion and notes LP distributions stuck at 14% of net asset value, so sponsors are under pressure to exit. Your company will be marketed again in three to seven years, to a bigger sponsor, a strategic, a continuation fund or the public market. Platform founders often go through two or three of these cycles; Visma has had six owners since 2006. Decide early whether you want to be the CEO who sells the company twice or the chair who steps back after the first.
Platform or add-on: which are you, and when does PE beat a strategic buyer?
If a sponsor is building a platform in your category, you are either the first acquisition, priced as the platform with a full rollover and a CEO seat, or one of the later add-ons, priced closer to a strategic acquisition by a company that happens to be PE-owned. PitchBook counts add-ons at about 65% of US PE deals in Q2 2025. An add-on sale is faster and simpler, but you are being integrated, your equity is usually offered in the platform rather than your own company, and the leaver provisions are the platform's, not yours. Ask on the first call which one you are.
Private equity beats a strategic when three things hold. First, no strategic will pay for your standalone growth because they would shut your product down or cannibalise their own. Second, you want to keep running the business, which a strategic rarely offers for long. Third, you believe the next cycle of growth is worth more than today's premium, so a rollover is a bet you want to make. Strategics still win on headline price where there are synergies to share, as the strategic sale guide explains; a dual-track process that invites both is the usual answer in a competitive auction.
A note on timing. Bain reports buyout deal value of $904 billion in 2025, up 44% and the second-highest year on record, with 13 deals above $10 billion accounting for $274 billion of it. Deal supply is not the constraint; fundraising fell for a fourth straight year to $395 billion. Sponsors with dry powder and a looming fund deadline pay full prices for clean assets. If you are clean, run a process; if you are not, spend a year fixing the issues in the exit map before you let a banker call anyone.
What it is worth — and what reaches you
A sponsor's price is the output of a returns model, not a view on what your company is worth to the world. Start from their equation: entry EBITDA times multiple equals enterprise value; equity plus debt funds it; exit EBITDA times exit multiple minus remaining debt returns the equity; the fund needs 2.5× in five years. Everything you can show that raises exit EBITDA or lowers risk to the lender moves the entry price. Everything that looks like a one-off, a founder dependency or a working-capital hole moves it down.
From headline price to founder bank account
Take a $100 million enterprise value. Deduct $8 million of debt-like items and a $2 million working-capital shortfall and equity value is $90 million. Liquidation preferences on your venture rounds take their 1× first, say $25 million on $25 million invested, before the remaining $65 million is shared with common. If you hold 40% of common, your gross share is about $26 million. Roll 25% of it, so $6.5 million, into the new holding company and you receive $19.5 million in cash, less your share of banker and legal fees, less any escrow or W&I retention, less capital gains tax where the rollover does not qualify for deferral. A headline of $100 million becomes perhaps $15 million in the bank and a $6.5 million second bite that could be worth two or three times that in five years, or nothing.
The process, step by step
Hire a real CFO, move to monthly close and audited accounts, clean the cap table and change-of-control clauses, and build the KPI pack a lender will want: cohorts, retention, concentration and cash conversion.
Commission a vendor quality-of-earnings report and a short legal vendor due diligence pack. Appoint an adviser who knows the sponsors in your vertical and can run a dual track with strategics if the size justifies it.
Teaser and information memorandum to 15–40 funds, management presentations to 5–8, first-round bids stating price, rollover expectation, leverage assumptions and management terms. Compare equity structures, not only headline EV.
Grant exclusivity only against a fully financed offer with a lender commitment letter. Negotiate SPA, shareholders' agreement, rollover and MIP in parallel; your own counsel on the management documents, paid by the company.
Merger control and FDI filings, consents from key customers, locked-box or completion accounts mechanics, debt funds flow. Agree the 100-day plan before closing so the first board meeting is about execution, not surprises.
Quarterly covenant tests, add-on acquisitions, pricing changes, management-plan vesting. The sponsor begins exit preparation around year three; your rollover and MIP crystallise on that sale.
Red flags and founder risks
Frequently asked questions
How much of my proceeds should I roll over into a private equity deal?
Most founder deals land between 10% and 40% of your gross proceeds, and Ropes & Gray records average rollover rising to 6% of total deal value in early 2025. Roll enough that you care and the sponsor believes you, but take enough cash off the table that your family's finances no longer depend on the company. A useful test: if the rollover went to zero, would you still consider the deal a success? If not, roll less. Also check whether the rollover qualifies for tax deferral in your jurisdiction; if it does not, the after-tax amount you are reinvesting is smaller than it looks.
Will I stay CEO after selling to private equity?
Usually, at least for the first two or three years; sponsors buy management teams and underwrite the plan on your presence. But the board now controls your appointment, and sponsors commonly bring in a professional CEO before their own exit, moving the founder to executive chair or product. Your service agreement and leaver provisions define what that transition costs you, so negotiate good-leaver treatment for a removal without cause and vesting acceleration on a sponsor exit. Zendesk's Mikkel Svane left within months of the 2022 take-private; Michael Dell ran his company for the whole hold and beyond. Both outcomes were decided in the documents.
Does private equity pay less than a strategic acquirer?
Often, but not always. Strategics can pay for synergies and typically offer a 20–40% higher headline when they exist, as explained in the strategic sale guide. Sponsors pay for standalone cash flow and leverage, so for a company without an obvious strategic home, or in a competitive auction with several funds, the PE price can match or exceed the strategic one. The real comparison is total value: a lower headline plus a 20% rollover that triples in five years can beat a higher all-cash strategic offer, if you believe the plan and the structure protects your stake.
What is the difference between locked box and completion accounts?
Both decide how the equity price adjusts for cash, debt and working capital. Under a locked box, common in UK and European sponsor deals, the price is fixed on a historical balance sheet date and the buyer takes the economic risk from then, with the seller promising no value has leaked out since; you get certainty and sometimes an interest-like ticking fee. Under completion accounts, more common in the US, the price is trued up after closing on actual figures, which means a post-closing dispute process and typically an escrow. CMS's European M&A Study 2025 notes locked box gaining ground where no other price adjustment applies. Choose based on how predictable your working capital is.
Founder Exit Playbook — all 11 parts
Start at the series hub for the route comparison table and the decision checklist.
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Sources
- Bain & Company, Global Private Equity Report 2026 (via PE Insights summary)
- PitchBook Q2 2025 US PE Breakdown (via Crowdfund Insider)
- Ropes & Gray, US PE Market Recap, April 2025
- Aventis Advisors, SaaS Valuation Multiples 2015–2026
- CMS European M&A Study 2025
- Silver Lake: Dell completes go-private transaction, 29 October 2013
- Dell Inc. DEFA14A, 5 February 2013 (SEC)
- Fortune: Michael Dell wins vote to relist Dell Technologies, December 2018
- Permira: Zendesk to be acquired by investor group led by Hellman & Friedman and Permira for $10.2 billion
- TechCrunch: Industry analysts see Zendesk sale as pressure release, June 2022
- tech.eu: Visma's valuation reaches €19B, December 2023
- Hg: Hg leads $5.3bn buyout of Visma, June 2017
- Dayforce 8-K: Thoma Bravo to acquire Dayforce for $12.3B, August 2025 (SEC)
- Inside Arbitrage: Thoma Bravo acquires PROS Holdings for $1.4 billion, September 2025
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