One of the biggest shifts we’re seeing in conversations with founder-owners today is that very few are asking, “How do I sell my company?”
Instead, they’re asking a different question:
“How much should I sell?”
The distinction matters.
For decades, an exit was viewed as a singular event: build a company, sell it, collect the proceeds, and move on. Today, many founders are approaching liquidity with a far more strategic mindset. They want to monetize a portion of what they’ve built, reduce personal financial risk, and still participate in the value they believe remains ahead.
As a result, the conversation has evolved from simply selling a business to thoughtfully structuring wealth creation.
The answer increasingly lies in understanding the capital stack.
A Different Market Has Created a Different Approach
Over the past several years, higher interest rates and tighter lending standards have changed how transactions are financed.
Historically, leveraged buyouts relied heavily on inexpensive debt. As borrowing costs increased and lenders became more selective, private equity sponsors were forced to become more creative in how they structured transactions.
What’s interesting is that while financing conditions have become more challenging, valuations for high-quality businesses have remained remarkably resilient.
The result has been a new era of partnership between founder-owners and financial sponsors.
Rather than viewing founders solely as sellers, sponsors increasingly view them as strategic partners whose continued participation can create meaningful value after closing.
This shift has transformed modern transactions.
Today, many deals are less about maximizing proceeds at closing and more about balancing three objectives:
- Creating immediate liquidity
- Reducing concentrated personal risk
- Participating in future value creation
When structured properly, founders no longer must choose one, at the expense of the others.
The New Capital Stack: Multiple Paths to Wealth Creation
Today’s transactions often combine several forms of capital, each designed to accomplish a different objective.
1. Rollover Equity: The Foundation of the Second Bite
If there’s one concept founders should understand before entering today’s market, it’s rollover equity.
Rather than selling 100% of their ownership, founders frequently reinvest a portion of their proceeds into the newly capitalized company, alongside the private equity sponsor.
The logic is straightforward.
Sponsors want founders to remain invested because they bring institutional knowledge, customer relationships, and operational expertise that cannot be replicated overnight. Founders remain invested because they continue to believe in the business they spent years building.
What often surprises founders is how meaningful this retained ownership can become.
In many successful transactions, the second liquidity event ultimately generates more wealth than the first.
A founder may take significant cash off the table today while maintaining an ownership position that benefits from future growth initiatives, acquisitions, operational improvements, and expanded market opportunities.
Increasingly, the second bite is becoming the largest bite.
2. Seller Notes: Participating as a Capital Provider
Seller notes have become an increasingly common component of middle-market transactions.
Under this structure, founders defer a portion of their proceeds and receive scheduled repayments over time, typically at attractive interest rates.
For sponsors, seller notes can reduce upfront capital requirements. For founders, they can create an additional source of return while increasing overall transaction flexibility.
Just as importantly, seller notes often signal confidence in the business’s future performance and alignment between buyer and seller.
3. Preferred Equity: Balancing Income and Upside
For founders seeking a balance between wealth preservation and future participation, preferred equity structures can offer a compelling solution.
Preferred securities frequently provide annual distributions, priority payment rights, and greater downside protection than common equity ownership.
This can be particularly attractive for entrepreneurs who are nearing retirement or seeking additional income, while maintaining exposure to future growth.
Rather than choosing between a complete exit and continued operational risk, preferred equity often creates a middle ground.
4. Co-Investment: The Evolution from Founder to Investor
Some of the most successful founder-owners are taking an even broader view.
In addition to retaining ownership in their core business, they are becoming investors themselves.
Many sponsors invite founders to participate in add-on acquisitions, expansion initiatives, or other investment opportunities within the broader platform.
For entrepreneurs who have spent decades creating value, this can represent a natural evolution—from operating a company to deploying capital alongside experienced investment partners.
The founder who once built a single enterprise begins building a diversified investment portfolio.
Why Alignment Matters More Than Ever
One thing we’ve noticed is that founders often focus almost exclusively on valuation during the early stages of a transaction.
While valuation matters, it is not always the primary driver of long-term wealth creation.
The highest offer is not necessarily the best outcome.
Deal structure, partner quality, future participation opportunities, governance alignment, and growth strategy can ultimately have a greater impact than an additional turn of EBITDA at closing.
Sponsors have increasingly recognized this reality as well.
When founders remain invested, transactions often benefit from stronger employee retention, greater customer confidence, smoother integration, and reduced execution risk.
The relationship changes.
It is no longer a buyer and a seller sitting across the table from one another.
It becomes a partnership focused on creating value together.
Capital remains important.
Shared conviction becomes equally important.
A Structural Shift, Not a Temporary Trend
Even if interest rates decline and credit markets become more accommodating, we do not expect this evolution to reverse.
The tools developed during this period have proven too effective.
More importantly, founders have become increasingly sophisticated in how they think about liquidity and wealth creation.
Many are no longer seeking a single transaction that marks the end of their journey. They are seeking a strategic recapitalization event that creates options.
The founders creating the greatest long-term wealth today are not necessarily those achieving the highest valuation.
More often, they are the ones taking a thoughtful approach to liquidity, alignment, and future participation.
The conversation has evolved from “How do I exit?” to “How do I create options?”
In our view, that is one of the most important shifts occurring in the middle market today.
