For many founders, private equity still carries a reputation problem.
Ask around after any acquisition announcement and you will hear the same reactions:
โThey are going to gut the company.โ
โThe culture will disappear.โ
โThe founder just sold out.โ
โEverything changes after PE walks in.โ
Sometimes those fears are justified.
Sometimes they are completely wrong.
In the latest episode of This Is M&A, Richard Groberg, Managing Director at MidCap Advisors, cuts through the noise surrounding private equity and explains what founders actually need to understand before selling their business.
The answer is not black and white.
Private equity can absolutely become a force multiplier for the right company, the right founder, and the right deal structure.
But only if founders understand what they are truly signing up for.
Richard should know. Over the course of his career, he has completed more than $2.8 billion in transactions and advised founders through some of the most complex decisions of their lives. With experience as a CFO, COO, CEO, and investment banker, he has sat on both sides of the table โ operator and advisor.
And according to Richard, the biggest mistake founders make is thinking the deal ends when the wire hits.
That is usually when the real relationship begins.
It Is Not Like Selling Your House
Most founders approach a sale process thinking one thing matters most:
price.
Who offered the highest valuation?
Who wrote the biggest number?
Who wins the auction?
But Richard explains that experienced sellers know the headline number rarely tells the full story.
Because most founders are not walking away completely after a transaction.
They are staying involved.
They still run the business.
They still manage employees.
They still answer to growth expectations.
Only now they have a financial partner with capital, reporting structures, timelines, and strategic goals.
That changes everything.
โIt is not like selling your house,โ Richard explains during the episode. โYou are usually walking back into the same building the next day with a new partner.โ
And that is why the terms matter just as much as the valuation.
Cash at close.
Earnouts.
Rollover equity.
Governance rights.
Autonomy.
Employment agreements.
Decision-making authority.
These are the details that determine whether founders feel empowered after a sale โ or trapped.
PE Is Not the Enemy
One of the strongest themes in the episode is Richardโs refusal to demonize private equity.
In todayโs market, that perspective matters.
PE firms are often portrayed as purely financial operators focused only on cutting costs and flipping companies quickly. While bad deals certainly exist, Richard argues that the right PE partner can dramatically accelerate growth for founder-led businesses.
Especially in healthcare and lower middle market M&A.
The right partner can provide:
- Operational discipline
- Recruiting infrastructure
- Expansion capital
- Acquisition support
- Better systems and reporting
- Access to larger strategic opportunities
For physician groups, healthcare operators, and founder-led businesses trying to scale, that support can become transformational.
Richard points out that many founders reach a ceiling on their own.
Private equity can help break through it.
And when structured correctly, founders can benefit twice:
once at the initial sale and again through future equity appreciation.
That second exit opportunity is what many refer to as โthe second bite of the apple.โ
The Second Bite Can Be Bigger Than the First
One of the most misunderstood concepts in M&A is rollover equity.
Founders hear the pitch all the time:
โStay invested.โ
โGrow the platform.โ
โParticipate in the upside.โ
But Richard explains that not all rollover equity is created equally.
Some founders roll equity into incredibly successful platforms and generate life-changing wealth during the second exit.
Others discover too late that the economics were heavily stacked against them.
That is why understanding the structure matters.
Founders need to ask:
- What valuation is the rollover based on?
- What dilution protections exist?
- Who controls future decisions?
- What happens during recapitalizations?
- How is liquidity handled?
- What authority remains with management?
These are not technical footnotes.
These are wealth-defining questions.
Because once the deal closes, leverage disappears quickly.
The Acquisition Vortex
Richard introduces a phrase during the episode that perfectly captures what many founders experience during a sale process:
โThe acquisition vortex.โ
It starts after the LOI is signed.
The buyer launches diligence.
Lawyers get involved.
Accountants start digging.
Requests multiply daily.
Pressure increases.
The founder is still trying to operate the business while simultaneously surviving the transaction process.
This is where many first-time sellers get overwhelmed.
Emotionally drained founders often begin conceding important issues simply to get the deal done.
That is why Richard emphasizes the importance of having experienced advisors manage the process and negotiate major issues before exclusivity begins.
Because after the LOI, leverage changes.
The buyer knows the founder is emotionally invested.
The founder knows months of work are already committed.
Walking away becomes harder.
And that is where vague terms become dangerous.
Deal Landmines Live in the Fine Print
According to Richard, most post-close disasters are not caused by massive fraud or catastrophic events.
They come from ambiguity.
Especially around:
- Earnouts
- Compensation structures
- Reporting expectations
- Decision-making authority
- Operational control
- Performance metrics
For example, founders may agree to aggressive earnout targets without controlling the operational decisions needed to hit them.
Or they may roll equity into a platform without fully understanding how future dilution works.
Or they assume they will maintain autonomy after closing โ only to discover every major decision now requires approval.
Richardโs advice is simple:
If it matters, negotiate it before signing.
Because you cannot enforce assumptions later.
You can only enforce contracts.
What Life Looks Like After Closing
One of the most refreshing parts of the conversation is how honestly Richard talks about post-close reality.
Many founders believe selling their company will reduce stress.
Sometimes it does.
Sometimes it creates a completely different kind of pressure.
Now there are board meetings.
Monthly reporting packages.
Growth mandates.
Budget approvals.
Integration plans.
Performance reviews.
And for founders who built companies independently for years, that adjustment can become emotionally difficult.
That is why cultural fit and working relationships matter just as much as economics.
Richard emphasizes that founders need to understand not only what the buyer is paying โ but how the buyer operates.
Because the day after closing, you are no longer building alone.
Negotiate Everything. Even the Cookies.
One of the best moments in the episode comes from Richardโs story about office cookies.
It sounds funny on the surface.
It is actually a lesson about leverage.
Before a deal closes, almost everything is negotiable.
After closing, almost nothing is easy.
Founders often hesitate to negotiate issues that feel โtoo smallโ or โtoo personal.โ
But culture, flexibility, reporting structures, staffing authority, office expectations, and operational freedom become very big issues later if they are never discussed upfront.
The cookies story becomes a perfect metaphor for M&A itself:
if something matters to you, negotiate it before signing.
Not after.
Final Thoughts
Private equity is not automatically the hero.
It is not automatically the villain either.
Like most things in M&A, outcomes depend on structure, alignment, communication, and expectations.
The founders who navigate PE successfully are usually the ones who understand that selling a company is not simply a transaction.
It is the beginning of a new partnership.
Richard Grobergโs conversation on This Is M&A offers founders a realistic, experience-driven look at what happens before, during, and after a sale process โ from LOIs and rollover equity to earnouts, governance, and post-close life.
For founders considering an exit, the lesson is clear:
Do not just negotiate the price.
Negotiate the future you actually want to live in.
Listen to the Full Episode
Learn more about Richard and MidCap Advisors:
- Website: https://midcapadvisors.com/
- LinkedIn: https://linkedin.com/in/rsgadvisorsllc/
- Email: [email protected]
Connect with host Steven Monterroso:
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