Private equity sounds like a world reserved for nine-figure transactions — leveraged buyouts of public companies, billion-dollar fund raises, partners in Midtown Manhattan offices. That image is two decades out of date.

In 2025, lower-middle-market private equity firms — those targeting businesses with $2 million to $15 million in EBITDA — deployed over $180 billion in the United States. These firms are not looking at Fortune 500 companies. They are looking at yours.

The entry criteria are specific, consistent, and surprisingly accessible. Understanding them doesn't just help you attract a PE buyer — it helps you build a better business regardless of whether you ever sell.

Private equity firms think in EBITDA — earnings before interest, taxes, depreciation, and amortization. It is their universal currency. For lower-middle-market firms, the minimum EBITDA threshold is typically $1.5 million to $2 million. Below that, the deal economics don't work: the legal, accounting, and due diligence costs consume too much of the transaction value.

Above $2 million in EBITDA, you are in the zone. The multiples PE firms pay vary by sector — 5x to 7x for most service businesses, 7x to 10x for recurring-revenue technology companies, 4x to 6x for manufacturing. But the threshold to enter the conversation is consistent.

For founders running businesses below this threshold, the strategic path is clear. Grow EBITDA above $2 million — through revenue growth, margin improvement, or both — and an entirely new category of buyer becomes available.

PE firms acquire businesses in two modes. Platform acquisitions are standalone businesses that will serve as the foundation for a portfolio company. Add-on acquisitions are smaller businesses bolted onto an existing platform to add capability, geography, or customer base.

Platform deals attract higher multiples. The PE firm is buying a foundation — a management team, a market position, and an infrastructure they can build upon. These businesses typically need $3 million or more in EBITDA, a proven management team, and a defensible market position.

Add-on deals are smaller and more frequent. A PE-backed HVAC platform might acquire twenty smaller HVAC companies over five years, consolidating market share and driving efficiency. The individual add-on companies are purchased at lower multiples — often 3x to 5x — but the aggregated entity is valued at 7x to 9x. This arbitrage is the engine of PE returns.

Understanding which role your business would play helps you price expectations and identify the right buyer pool.

Beyond EBITDA, PE firms evaluate five factors with remarkable consistency.

Recurring or repeatable revenue. Not necessarily subscription-based, but predictable. A B2B service company with 90% client retention and three-year average relationships has repeatable revenue even without formal contracts. PE firms prefer businesses where they can model next year's revenue with confidence.

Low customer concentration. The standard threshold is no single customer representing more than 15% of revenue. PE firms know that customer loss is the highest-probability risk in any acquisition. Concentration amplifies that risk to a level most firms will not accept.

Management depth. PE firms do not want to run businesses day to day. They install a board, set financial targets, and provide strategic guidance. The operating management team must be in place, competent, and motivated to stay post-acquisition. Businesses where the founder is the entire management layer are rarely attractive.

Defensible market position. PE firms ask: what prevents a competitor from replicating this business? The answer might be regulatory licenses, proprietary technology, long-term customer contracts, geographic density, or brand reputation. If the answer is "nothing, really," the PE firm moves on.

Margin stability. PE firms expect EBITDA margins of 15% or higher for most service businesses, 10% or higher for most product businesses. More importantly, they expect those margins to be stable or improving over a three to five year horizon. Declining margins — even from a high base — signal structural problems.

Most PE firms will never cold-call you. They source deals through intermediaries — investment bankers, M&A advisors, business brokers, and industry contacts. If you want to attract PE attention, you need to be visible to those intermediaries.

This doesn't require hiring a banker immediately. Attending industry conferences where PE firms are active, joining CEO peer groups where deal-makers circulate, and building relationships with M&A advisors in your sector — these are the activities that put you on the radar.

The businesses that receive PE offers are not always the largest in their market. They are the ones that meet the criteria, present themselves professionally, and are visible to the right people at the right time.

The checklist is not secret. The bar is not impossibly high. It is specific, measurable, and achievable — which is exactly what makes it worth pursuing.