Key Takeaways
- • Panelists from CBIZ, GHJ and Marshall & Stevens say founders should prepare for a sale well before they intend to exit, since buyers place a premium on reliable financial reporting, scalable operations, strong management teams and visibility into future performance.
- • Kelly O'Neil (CBIZ) warns that a lacking succession plan drastically increases operational risk and lowers valuation, and that acquirers may heavily discount purchase prices by 20% to 50% when a founder insists on an immediate exit with no transition window.
- • Nishen Radia (Marshall & Stevens) says a strategic buyer is often the better fit for the cleanest exit, while a PE group suits founders seeking partial diversification or a growth partner, and that succession gaps are not a deal breaker if the timeline is disclosed upfront.
- • David Sutton (GHJ) notes diligence has shifted from validating historical earnings to assessing revenue quality, customer retention, recurring revenue and the sustainability of future cash flows.
- • O'Neil cites up to 12 million U.S. privately owned small businesses projected to change hands in the next decade as Baby Boomer owners retire, with few holding formal succession plans.
Summary
A roundtable produced by the Los Angeles Times Studios with CBIZ, GHJ and Marshall & Stevens examined private equity and M&A trends for 2026. According to David Sutton, Partner and Transaction Advisory Services Practice Leader at GHJ, California continues to attract private equity investment due to its innovation, entrepreneurial talent and diverse industries, but buyers are more selective, emphasizing scalable operations, strong management teams, reliable data and confidence in future growth.
On preparing for a sale, Kelly O'Neil, Managing Director and West Region Private Equity Leader at CBIZ, advised founders to build transferable value by replacing one-off projects with predictable and recurring revenue, maintaining organized books, documenting owner add-back expenses, and creating standard operating procedures and a capable leadership team. Nishen Radia, CEO of Marshall & Stevens, recommended starting from the buyer's perspective, focusing on business quality and the durability of revenue, and noted that a credible AI strategy is a prerequisite in any M&A process. Sutton added that value-reducing issues such as customer concentration, inconsistent reporting and key-person dependence should be addressed well before a sale process begins.
Radia said the choice between a strategic buyer and a PE group often turns on the founder's motivation rather than price. Strategic buyers typically do not require founders to roll proceeds into equity, though an earnout may apply, while PE groups suit founders seeking partial liquidity and a growth partner. O'Neil emphasized that cultural friction is a frequent contributor to merger failure rates.
On AI, Sutton said buyers increasingly assess whether technology improves scalability, decision-making and competitive advantage, and that automation allows advisors to analyze larger datasets while experienced professionals remain essential for interpretation. On succession, O'Neil described it as one of the most critical factors in evaluating an acquisition, while Radia said an immediate retirement can reduce valuation if not explained, though a succession plan and rollover equity or an earnout can mitigate concerns.
O'Neil described a wave of family-owned and Baby Boomer-run business transitions in the lower middle market, citing up to 12 million such businesses projected to change hands over the next decade. Radia noted that minority investments and majority recapitalizations offer liquidity while retaining upside, with minority investors typically negotiating board seats, protective provisions and exit rights. Finally, O'Neil identified unreliable EBITDA, inaccurate add-backs that fail Quality of Earnings review, and customer concentration as common causes of delayed, repriced or failed deals.
On preparing for a sale, Kelly O'Neil, Managing Director and West Region Private Equity Leader at CBIZ, advised founders to build transferable value by replacing one-off projects with predictable and recurring revenue, maintaining organized books, documenting owner add-back expenses, and creating standard operating procedures and a capable leadership team. Nishen Radia, CEO of Marshall & Stevens, recommended starting from the buyer's perspective, focusing on business quality and the durability of revenue, and noted that a credible AI strategy is a prerequisite in any M&A process. Sutton added that value-reducing issues such as customer concentration, inconsistent reporting and key-person dependence should be addressed well before a sale process begins.
Radia said the choice between a strategic buyer and a PE group often turns on the founder's motivation rather than price. Strategic buyers typically do not require founders to roll proceeds into equity, though an earnout may apply, while PE groups suit founders seeking partial liquidity and a growth partner. O'Neil emphasized that cultural friction is a frequent contributor to merger failure rates.
On AI, Sutton said buyers increasingly assess whether technology improves scalability, decision-making and competitive advantage, and that automation allows advisors to analyze larger datasets while experienced professionals remain essential for interpretation. On succession, O'Neil described it as one of the most critical factors in evaluating an acquisition, while Radia said an immediate retirement can reduce valuation if not explained, though a succession plan and rollover equity or an earnout can mitigate concerns.
O'Neil described a wave of family-owned and Baby Boomer-run business transitions in the lower middle market, citing up to 12 million such businesses projected to change hands over the next decade. Radia noted that minority investments and majority recapitalizations offer liquidity while retaining upside, with minority investors typically negotiating board seats, protective provisions and exit rights. Finally, O'Neil identified unreliable EBITDA, inaccurate add-backs that fail Quality of Earnings review, and customer concentration as common causes of delayed, repriced or failed deals.
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