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There's a number sitting inside a McKinsey report that should change how you read every PE-backed business that crosses your desk this year: 16,000. 

That's how many companies globally have sat inside PE portfolios for more than four years – 52% of all buyout-backed inventory, the highest share on record. 

Average hold period: 6.6 years. Also a record. 

PE firms are under real pressure to sell, and McKinsey recently published a seven-strategy playbook telling sponsors exactly how to get unstuck. 

I read it as a buyer, not a seller. Everything McKinsey is telling sponsors to do in the final stretch before a sale is something a smart buyer needs to know how to spot.

Value-capture sprints. McKinsey's guidance to sponsors: in the 12 to 18 months before a sale, launch initiatives that show up fast – pricing changes, cost cuts, process fixes. Done well, this adds 10-25% to equity value on top of whatever the business built over the full hold. For a buyer, that means recent margin expansion in a PE-backed business isn't automatically organic. Ask when it started and what actually drove it: a cost-cutting push that started six months ago doesn't always survive a change of ownership.

AI readiness. McKinsey tells sponsors to walk into diligence with a documented AI roadmap – priority use cases, a named owner, something actually running. For a buyer, an AI rollout that's six months old and half-built is still being sold as a capability. Ask what it does today, who runs it day-to-day, and whether it keeps working once the seller's team walks out the door.

Buyer mapping and positioning. McKinsey advises sponsors to map the buyer universe early and shape the pitch to whoever's across the table – synergies for a corporate buyer, upside for a financial one. For a buyer, the information memorandum in your hands wasn't written for buyers in general. It was written for you. Know what story you're being told, and why you're the one hearing it.

Entry multiples for PE buyouts rose from 11.3 times EBITDA in 2024 to 11.8 times EBITDA in 2025 – even as returns from debt leverage and multiple expansion keep shrinking. Meaning the sponsors are paying more for the same assets while leaning harder on operational improvement to make the math work. That's exactly the pressure this week's piece is about.

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This is where it gets practical. If you're evaluating a PE-backed business, here's the checklist I'd run before signing anything:

None of this makes a PE-backed business a bad acquisition. Some of the best-run companies in the lower middle market carry real PE operating discipline behind them. Durable margins, clean systems, a management team that actually knows its numbers – that's not something to run from.

An exit process, however, creates specific, predictable pressure, and that pressure shows up in specific, predictable places: in margin timing, in capex that got pushed, in technology that's newer than it looks. Buyers who know where to look aren't surprised six months after close. Buyers who don't ask these questions find out the hard way – usually around the same time the "AI-powered" system they inherited turns out to be a spreadsheet with a chatbot bolted on.

Lynnfield doesn't run any version of this playbook, and that’s baked into our structure.

We don't have a fund clock, so there's no exit sprint to launch. We don't have limited partners waiting on a distribution schedule, so there's no 18-month window where margin improvement suddenly becomes urgent. We don't map buyers, because we're not selling unless it’s in the best interests of the business that we do.

When you're buying to hold permanently, the incentive to compress years of margin work into the last stretch before a sale simply doesn't exist. Growth happens on the business's own timeline, not the fund's. That’s the whole point of permanent capital.

At Lynnfield, we acquire cash-flowing businesses in the $1M–$10M EBITDA range and offer co-investment opportunities to qualified investors. Join our investor list to receive deal flow as we evaluate new acquisitions. 

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Thanks for reading!

Sixteen thousand companies. That's the number we started with, and it's worth sitting with: 16,000 businesses where someone, right now, is running some version of McKinsey's seven-strategy playbook. 

Some of those businesses are genuinely great – durable, well-run, priced fairly. Some are cosmetically improved for exactly long enough to get through a sale. But the difference won’t show up on the pitch deck. It shows up in diligence, if you know which questions to ask.

If you're looking at a PE-backed business right now and want to compare notes on what you're seeing, reply to this email. I read every response.

Talk soon,
Param

P.S. In case you’re joining us late, check out our previous editions.