Not every company is ready to serve as a platform investment—a role that requires scale, a strong and tenured management team, and high growth potential. In this article, we interview private equity partners who share the key indicators they use to assess if a business is positioned to become a platform investment. From operational efficiency, infrastructure, and experience with acquisitions, these experts discuss the readiness signs and provide insights into what makes a company an attractive foundation for building a larger portfolio.
Explore our other articles in this series of roundtable discussions with private equity investors:
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- The Signs Private Equity Looks for When It’s Time to Sell a Business
- How Private Equity Prepares a Business for Sale to Ensure a Smooth Deal Process
- What Entrepreneurs Often Neglect to Do When Preparing to Sell Their Company to Private Equity
- Private Equity’s Advice to Business Owners Selling Their Company
Meet the Panel of Private Equity Partners
The following responses have been edited for concision and clarity.
Sean McNally
It depends on what you mean by a platform. We seek to partner with strong businesses in great industries, but often we’re investing to help them become more scalable and robust platforms. Initially, they may not be ready to take on acquisitions, but after a couple of years of growth and investment, they usually are.
You don’t need to be hyper-growth or ready for significant debt out of the gate. If you have scale, strong growth, a clear understanding of your metrics, and are in an exciting market, you’re likely an attractive platform opportunity for private equity.
Erik Dykema
First, it’s important to understand if they really want partners. We’re focused on partner-oriented deals where there’s a meaningful equity rollover. Regardless of the specifics, the key reality is that if you become a platform, you’ll have a board of directors. This board will include other people who want to collaborate on decision-making.
You have to be realistic—it won’t just be your show anymore. Ideally, you’ll recognize the value of having partners who can contribute—whether organizationally, strategically, or with expertise in areas like supply chain, cost reduction, growth strategy, sales-force development, and more. Quality private equity firms bring a lot to the table, but you have to genuinely want a partnership with people you like and respect.
Another major consideration is the organization itself. While we invest in successful companies, they often reach a point where they need full-time help—beyond just board-level guidance—to scale further. Whether it’s hiring people with strong operations, sales, or finance skills, you need to be prepared to make those changes to take the company to the next level.
Ryan Anderson
There’s a big difference between being a platform with demonstrated historical growth and a small business that’s never done M&A before but now expects to become an acquisition machine. Businesses that have never integrated assets before or have only done a deal or two often expect that going forward they’ll seamlessly execute multiple acquisitions each year. It works in Excel, but it doesn’t work in the real world.
Brendan Forghani
The size of the business and the depth of the team are important. Smaller companies can thrive on the efforts of a founder or a few key people; but to scale, acquire, and integrate other companies, you need processes and people in place. If you don’t have that, are you willing to invest in building it? A business might be large enough but lacking in acquisitions experience, so it’s also about whether you have the foundation to support future growth. ERP systems, accounting, and reporting resources become crucial as the reporting burden increases; but the biggest factor is the depth of the team.
Brandon Muirhead
Two broad elements need to be in place: scale and infrastructure.
Scale means a business is large enough to be a foundational asset—something that can support additional acquisitions or growth initiatives. Generally, platform businesses are already leaders in their market or have the potential to dominate with further investment.
The second piece is having the right infrastructure. This includes everything from a solid management team, to proper accounting systems, to operational processes. These elements need to be robust enough to handle growth and acquisitions. If your business is still figuring out basic processes, it might not be ready for the complexities that come with being a platform.
