Got a letter from a private equity firm? Read this before you reply

So a letter showed up. Or an email, or a voicemail from someone with a friendly voice and a firm name you've never heard of, saying they're "interested in acquiring a business like yours" and would love fifteen minutes of your time. Maybe it even floated a number, or a multiple, or the phrase "premium valuation." Here's the first thing to know: that letter is not a valuation, and it's probably not even about your business specifically. Some buyers and intermediaries use broad outbound campaigns to contact business owners. The dossier does not establish the size of a typical campaign or how a specific sender built its list. Getting one means you're on the list. That's all it means.

The second thing to know: the letter is still worth taking seriously, just not in the way the sender hopes. It's a signal that buyers are active in your trade and that your business fits a profile they want. What you do next matters. Reply casually and you can quietly give away your negotiating position before a real negotiation even starts. Ignore it forever and you stay in the dark about what you own. The right move is a calm middle path: don't ignore it, don't sign anything, and get a confidential second opinion from someone on your side before you say much of anything to the person who sent it. This page walks you through all of it.

Not sure which step fits your situation? Use the buyer outreach decision guide for a tailored next-step summary before you respond.

What that letter really is

Private equity firms, and the search funds and family offices that behave like them, have been rolling up the trades for years now. Their model depends on buying a steady stream of solid, boring, profitable service businesses. To find them, they run outbound campaigns: mailing lists, cold email sequences, hired callers. The letters are written to feel personal. They are not. The message may be part of a broader outreach campaign, so treat it as an invitation to begin diligence rather than proof of a company-specific valuation.

Broad outreach is a marketing method. It can reflect an active acquisition strategy, but it does not establish the value of your company or the sender's ability to close. If you want the fuller picture of why your industry in particular is crawling with buyers, we wrote about it in why private equity is buying HVAC companies.

What the letter is not:

• It is not a valuation. Nobody who has never seen your financials can tell you what your business is worth. Any number provided before review of financial and operating information should be treated as preliminary and subject to assumptions, structure, and diligence.
• It is not a commitment. Even a specific-sounding offer is subject to due diligence, which is the buyer's detailed inspection of your books, and everything can change after it.
• It is not a deadline. Phrases like "we're actively deploying capital this quarter" are there to make you move fast. Do not accept a compressed deadline without understanding the buyer's reason, financing, diligence plan, and requested exclusivity.

One more thing owners often miss: the letter may not even be from the buyer. Many come from intermediaries paid to fill a pipeline. The person calling you "partner" on the phone may have no authority to buy anything.

Why replying casually can cost you real money

The natural instinct is to pick up the phone, have a friendly chat, and see what they say. It feels harmless. It usually isn't, for three reasons.

1. You anchor the price low

Somewhere early in that friendly chat comes the question: "Just ballpark, what were you hoping to get for the business?" If you toss out a number, you have just set the ceiling on your own deal. Naming a number too early can anchor the conversation and limit the seller’s leverage. Naming a price before understanding earnings, structure, and market context can anchor the discussion prematurely. A multiple is simply the number a buyer multiplies your annual profit by to get a price, and where your business lands in the range depends on things most owners have never had appraised. If you haven't read it yet, how private equity values a business explains the whole math in plain English.

2. You reveal your urgency

"How much longer do you see yourself running the business?" is not small talk. It's the most valuable question in the buyer's script. If they learn you're tired, that your health is pushing you, that your kids don't want the business, or that a partner wants out, the offer will be shaped around your urgency instead of your company's value. Disclosing urgency can affect negotiating leverage, but the dossier does not establish a predictable price effect. Every unguarded thing you say in that first call gets written down and used later.

3. You negotiate alone against professionals

The person on that call buys businesses for a living. They have done this dance dozens or hundreds of times. You have done it zero times, and you will do it once. That's not an insult, it's arithmetic, and it's the entire reason their outreach goes to owners directly instead of through advisors. When an owner engages alone, the buyer negotiates against someone learning the rules mid-game. Independent legal, tax, financial, and valuation advice can help an owner evaluate price, structure, and risk. The dossier does not quantify the effect on terms.

What a first offer usually leaves out

Suppose the conversation goes further and a real offer shows up. The headline number is what your eye goes to. The structure is what actually determines what you get. A preliminary offer may omit detail about structure, working capital, contingencies, and post-closing obligations. Ask for those terms before comparing headline values. Before you get excited about any number, ask what it's made of:

• Cash at close. The money wired to you the day the deal signs. This is the only part of the price that is certain. Everything else is a promise.
• Earnout. A portion of the price you only receive if the business hits targets after the sale, under the buyer's management, when you no longer control the decisions that drive those targets. Public information in the dossier does not establish a universal earnout payout rate. Payment depends on the contract and whether its conditions are met.
• Rollover equity. Instead of paying you fully in cash, the buyer asks you to reinvest part of your proceeds as ownership in their new, larger company. It can genuinely pay off in a second sale years later, and it can also end up worth little. Either way, it's money you didn't take off the table.
• Seller note. A chunk of the price paid to you over years, like a loan you're making to the buyer. If the business struggles under new ownership, you may wait a long time to collect.

A seven million dollar headline value made up of four million dollars in cash, a two million dollar earnout, and one million dollars in rollover has components with different timing, liquidity, and risk. Compare the components separately. Sometimes those maybes are fair and well built. Sometimes they're where the deal quietly shrinks. We break down each piece, and how to judge whether it's fair, in rollover equity, earnouts, and seller notes.

First offers also tend to skip over how the buyer will treat working capital, which is the cash and receivables the business needs to operate day to day, whether the price assumes your business comes debt-free, and what happens to your people. All of that gets settled in negotiation, and all of it moves real dollars.

The calm three-step response

Here's what to actually do with the thing sitting on your desk. No drama, no panic, no rushed reply.

Step one: don't ignore it

Ignoring the letter can mean missing a useful opportunity to assess the sender, the proposed process, and your own readiness. Even if you have zero interest in selling, this is the moment to find out what you actually own. Learning the value drivers early gives an owner more time to improve reporting, reduce concentration, and address avoidable diligence issues.

Step two: don't sign anything, especially an LOI

If you engage, sooner or later the buyer will push a letter of intent, or LOI, across the table. An LOI is the document that sketches the outline of the deal: price, structure, timeline. Buyers describe it as "non-binding," and most of it is. But nearly every LOI contains one very binding clause: exclusivity. A no-shop provision can restrict solicitation, information sharing, or negotiations with competing buyers for the period stated in the LOI. The dossier does not establish a typical duration.

The moment you sign, your leverage flips. Leverage, meaning your practical power to walk away and get a better deal elsewhere, comes from having options. Exclusivity removes your options. Then due diligence begins, the buyer's team combs through your books, and the "issues" they find become reasons the price should come down. This move even has a name in the trade: the retrade. A buyer may seek a price or structure change after diligence. Ask the buyer how it handles diligence findings and whether material changes affect exclusivity. The defense is simple: get the important terms nailed down and get your own advisors involved before exclusivity starts, not after. Never sign an LOI as a way to "just keep the conversation going."

Step three: get a confidential second opinion before you reply

Before you speak with the buyer, get an independent view of your valuation range and readiness. Not to hire an army of consultants, just one honest conversation covering three things: roughly what your business should be worth in today's market, whether the buyer can support its stated interest, financing, and process, and what you should and shouldn't say if you decide to engage. That preparation helps you enter the conversation with clearer expectations and stronger questions.

Before replying, establish an owner-focused baseline that is separate from the buyer's framing. Run your free Exit Score to estimate a valuation range and identify the business factors a buyer is likely to examine. Then review any offer with qualified legal, tax, and financial professionals before signing exclusivity or other binding terms.

If you do decide to engage

Talking to the buyer is a fine choice, once you're prepared. A serious buyer will respect an owner who takes their time; only the flaky ones vanish when you slow things down, and that tells you what their "offer" was worth. When you're ready, go in with your own questions instead of just answering theirs. We keep a full list in questions to ask a private equity buyer, and the wider playbook for the whole journey lives in selling to private equity. If you're still getting oriented on who these buyers even are, start with the plain-English private equity guide.

However this plays out, remember the quiet truth underneath all of it: they wrote to you. You have something they want. That's a position of strength, as long as you don't give it away in the first phone call.