A few years ago, in the private equity industry, congratulations came when the deal was signed. Today, industry professionals put it the other way around: congratulate me when I make the exit. That change in wording isn't trivial — it reflects a profound transformation in how PE funds create value and, by extension, in what they look for when they consider buying a company.
Understanding that shift is directly relevant to any business owner considering selling their SME to a fund, because what PE values in a target company today is substantially different from what it valued ten years ago.
The shift: from financial engineering to operational excellence
For a long time, private equity operated on a fundamentally financial logic. The fund identified a company with good numbers, negotiated the price, accessed cheap financing to leverage the deal, and a significant part of the return came from the financial structure itself — leverage, balance sheet engineering, and the arbitrage of the multiple between entry and exit.
That logic still exists today, but it's no longer the main engine. Financing isn't as cheap as it used to be, entry multiples have compressed in many sectors, and competition among funds for the best companies has increased. As a result, the difference between a good deal and a bad deal is no longer decided at signing, but in the three to five years between the purchase and the sale.
What has filled that space is operational excellence: the fund's ability to step into a company, professionalize it, implement a value creation plan (value creation plan), and leave it in a substantially better position when it sells than when it bought. Not just financially better — operationally better: more scalable, with a better team, stronger processes, and more mature governance.
What this means for the company being sold
For a business owner considering a sale to a PE fund, this shift has very direct consequences for how their company is evaluated and how much a buyer is willing to pay.
If PE generates its return in the post-acquisition value creation phase, what it looks for when buying isn't just a company with good numbers. It's looking for a company where it can implement an operating plan that transforms it. And that radically changes the buyer's checklist.
The team's autonomy matters as much as EBITDA. A fund isn't going to run the company day to day. It will bring in a professional CEO, restructure the management committee, and implement rigorous reporting. But for that to work, it needs the company to have a minimum level of organizational structure that doesn't depend exclusively on the founder. An SME where everything goes through the owner — customer relationships, operational decisions, team management — is a company where the value plan can't be implemented without risking the business deteriorating during the transition. Founder dependency is now one of the factors that generates the biggest discount in a PE valuation.
Processes and systems carry more weight than before. A fund that plans to execute a buy-and-build strategy — buying a platform and then making complementary acquisitions (add-ons) — needs the platform company to have systems that can be integrated, professional financial reporting, and documented processes. Without that, integration synergies stay on the PowerPoint slide. The ability to integrate is now a valuation variable.
Room for operational improvement can be an asset. This is counterintuitive: a company with room for operational improvement can be more attractive to a fund than one already operating at maximum efficiency. If the fund sees clear opportunities for improvement — professionalizing the sales force, implementing an ERP, redesigning the supply chain, expanding internationally — that's exactly the value plan that justifies its investment. What the fund needs is for those opportunities to be executable, not already executed.
The portfolio company CEO: the profile that drives transformation
When a fund buys an SME and the founder steps away — or stays on in a non-executive role — someone has to lead the operational transformation. That someone is the portfolio company CEO, a profile the industry has professionalized enormously over the past decade.
Headhunters who work with PE funds describe these CEOs as extraordinarily well-rounded. They need to be analytical — they understand the numbers and work comfortably with the reporting a fund demands. They need to be clear communicators — the strategy has to be simple to explain so the whole organization can align. They need to be hands-on — in an SME with €5 million to €30 million in revenue, there are no layers of middle management to cushion things; the CEO is in the operation. And they need to grant autonomy with accountability — each department head manages their area and reports precisely, under a governance model that probably didn't exist before.
Ideally, this CEO comes from the same sector or from sectors with similar dynamics, because the fund's time horizon — typically three to five years — leaves no room for a slow learning curve. Speed of execution is a critical factor.
For the seller, understanding this profile has practical value: this is the person who will replace you at the helm of your company. If your company is structured so that an outside professional can take over management with a reasonable transition, that translates into greater buyer confidence, a smaller discount for transition risk, and ultimately a better price.
The CFO who maps out the future
Another relevant change in the post-acquisition management team is the evolution of the CFO. The traditional profile of an SME's finance director was an administration and accounting profile — someone who reported on the past. The CFO a fund places in a portfolio company is a radically different profile: a business partner to the CEO, someone who helps design the company's financial future.
This CFO builds valuation models, analyzes organic and inorganic growth scenarios, manages the relationship with lenders, prepares the company for an eventual exit, and, in buy-and-build deals, leads the financial due diligence on the add-ons the group acquires.
One criterion specialized headhunters use to evaluate a good portfolio company CFO is telling: could this CFO be CEO tomorrow? If the answer is yes, they're probably the right profile.
What hasn't changed: Spain is full of outstanding business owners
PE's shift toward operational excellence shouldn't be read as a criticism of Spanish business owners. Quite the opposite. Funds operating in the Spanish mid-market openly acknowledge that the country's business landscape is full of extraordinary companies, built over decades by founders who did almost everything without institutional resources, formal governance, or a professional management team.
What PE brings isn't a replacement for what the founder did wrong — it's adding what the founder couldn't do alone: resources, experience from managing hundreds of companies, governance, access to financing, international expansion capabilities, and a professional team that can take the company to the next level of scale.
In fact, one of the ideas most often repeated by industry professionals is that private equity is the best thing that has happened to the Spanish business ecosystem, because it has provided continuity to companies that, without a clear successor, would have struggled to keep growing. In a country where hundreds of thousands of family-owned SMEs will face succession in the coming years, that continuity role is structurally important.
What all this means if you're thinking about selling
If you're considering selling your company and a PE fund is among your buyer options, there are three direct implications of everything above.
First, your company doesn't need to be perfect to be attractive. What it needs is to be transformable — to have clear opportunities for operational improvement that a professional team can execute. That's exactly what a fund is looking for.
Second, the better prepared your company is to operate without you, the better the price you'll get. Reducing founder dependency, having a management team capable of executing autonomously, and having documented processes and systems doesn't just make the transition easier — it's value that's reflected directly in the multiple.
Third, it pays to understand how a PE fund thinks before starting the process. They don't evaluate your company the same way a strategic buyer or a family office does. We've published a detailed analysis of how a private equity fund evaluates your company — the three levers, the size floor, and the questions they ask before moving forward.
🎙️ To discuss the evolution of private equity and the kind of talent the industry demands, we spoke with Pepo Escrivá de Romaní, partner at Euromanager, in episode 2x11 of Rainmaker:
