4 Steps to Partnering with a Private Equity Firm

By Hadley Capital
Published: February 18, 2016 | Last updated: March 21, 2024
Key Takeaways

Business owners should understand the importance of preparation before entering into a potential sale process.


For some business owners, partnering with a private equity firm is an option worth exploring. In this article, we’ll give you an overview of the steps Hadley Capital takes in this process and how only 1% of businesses actually make it through all of the steps to the final closing.


Step One: Introductions

Business owners often contact us directly to determine if we are interested in acquiring their company or partnering with them to invest in and help grow their business.

In other cases, intermediaries, including business brokers, investment bankers, commercial bankers, accountants, etc., introduce business owners to our firm. Frequently, the intermediary has been engaged by the business owner. Intermediaries can help owners reach a larger pool of buyers, guide owners through the sale process and assist owners in identifying qualified transaction advisors (such as attorneys).


Hadley Capital has acquired companies where intermediaries were involved and those where they were not. Choosing an intermediary – or not – is a personal decision. We have established relationships with intermediaries from all over the country and would be happy to make introductions to them.

Of the 1,000 or so companies we are introduced to each year, approximately 25% proceed to Step Two.

Step Two: Preliminary Review

Once we have determined that your business meets our investment criteria and you have determined that Hadley Capital is a legitimate buyer, we typically exchange a Confidentiality Agreement, so you can share the following information with us:

  • Summary of the needs of the business owner (outright sale, recapitalization or partial sale, management buyout, etc.)
  • Three to five years of financial results (P&L and balance sheet)
  • Review of annual Owners Benefits
  • Summary of top customers
  • Other information that is particularly relevant, based on the type of business (for example, annual capital expenditures in a capital-intensive business)

After reviewing this information and a follow-up telephone conversation, we will either confirm our interest and discuss next steps or politely decline. If we move ahead, Hadley Capital will typically issue a term sheet and arrange an on-site visit.

Of the 1,000 or so companies that we are introduced to each year, approximately 10% proceed to Step Three.


Step Three: From Term Sheet to LOI

After a successful visit, the process becomes more involved and more formal. Additional information is exchanged and another site visit may take place. As Hadley Capital continues to learn about your business and you learn more about us, further discussions regarding company valuation and transaction structure occur. The term sheet from Step Two may be revised multiple times during this stage and, eventually, lead to a formal Letter of Intent (LOI).

An LOI is a formal, written document indicating the terms a buyer is offering a seller in a proposed acquisition or investment. An LOI states a serious intent, by both parties, to carry out the proposed transaction. Hadley Capital is very selective about issuing LOIs because they indicate that we will be dedicating substantial resources to acquiring your business under the terms outlined in the LOI.

Download a sample copy of Hadley Capital’s LOI here.

Less than 1% of the companies we review result in a Letter of Intent and proceed to Step Four.

Step Four: From LOI to Closing

Due diligence is a rigorous 30-day review of the business and includes a detailed analysis of accounting history and practices, operating practices, customer and supplier references, management references and market reviews. The due diligence process is managed by a Hadley Capital partner with the assistance of third party advisors, such as accountants.

Hadley Capital has the committed capital required to complete acquisitions but, in nearly all cases, we use some form of debt financing to supplement our equity capital. The debt financing process includes identifying lenders interested in partnering with Hadley Capital to complete the acquisition. Hadley Capital maintains a large Rolodex of lenders that we partner with to complete acquisitions.

The final step in the acquisition process is the legal documentation and funding step. Upon completion of the legal process, the acquisition funds are wired to the seller and the acquisition is complete. When the deal is finally done, we can celebrate the beginning of our mutually beneficial and profitable future together.

Takeaway for Business Owners

This is a very brief overview of the transaction steps you might encounter when working through a private equity deal. As you can see from Hadley Capital’s process, only 10 companies out of 1,000 reviewed will move on to an LOI. These numbers are consistent with the average transaction process for most private equity firms. From this, business owners can take away the importance of preparation before entering into a potential sale process.

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Written by Hadley Capital

Hadley Capital

Hadley Capital was founded nearly 20 years ago specifically to invest in and grow small businesses. Since that time, we have completed more than 20 acquisitions, partnering with management teams, families and owner/executives to deliver results for our companies and investors.

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