Private Equity

Private equity (PE) refers to investment funds that acquire ownership stakes in private companies — companies whose shares are not traded on public stock exchanges. In the context of Canadian business sales, private equity buyers are financial sponsors who acquire businesses using a combination of investor capital (equity) and debt financing, aiming to grow or improve the business and exit at a higher valuation within a defined investment horizon (typically 4–7 years).

Private equity firms may be platform buyers (seeking to acquire a business and use it as the foundation for add-on acquisitions in the same industry) or add-on buyers (seeking to bolt a target onto an existing portfolio company). Platform acquisitions often command higher multiples than financial buyer acquisitions because the PE firm can realize synergies from the add-on strategy.

In Canada, PE involvement in lower middle market transactions (below $25 million) has grown significantly. PE buyers are disciplined on price and process — they expect rigorous due diligence, clean financial records, and well-documented operations. Quality of earnings reports, data rooms, and management presentations are standard requirements for PE-sponsored transactions.

See also: Financial Buyer, Strategic Buyer, Management Buyout, Leverage, ebitda-multiple" class="glossary-link">EBITDA Multiple.