For business owners considering an exit, the traditional model is well understood: negotiate a purchase price, close the transaction, wire the funds, and move on. But private equity partnerships offer a fundamentally different path—one that involves continued participation, equity rollover, and the potential for multiple liquidity events.

Understanding the structural and strategic differences between these two approaches is critical for owners evaluating what comes next.

The Traditional Exit: Full Liquidity, Full Exit

In a traditional exit, the owner sells 100% of their equity to a buyer—whether that's a strategic acquirer, financial buyer, or individual purchaser. The transaction is typically structured as an asset or stock sale with full consideration paid at close (or over a short earnout period).

Key characteristics:

• Full liquidity — The owner receives 100% of proceeds (minus transaction costs and taxes)
• Clean break — Involvement post-close is minimal or defined by a short transition period
• No ongoing exposure — The owner is no longer at risk for business performance
• Single exit event — All value is realized in one transaction

This structure works well for owners who want full liquidity, have achieved their wealth creation goals, or are ready to move on from operational involvement.

The Private Equity Partnership: Partial Liquidity, Continued Participation

A private equity partnership typically involves selling a majority or significant minority stake to a financial sponsor while the owner retains equity and remains involved in the business. This is often referred to as a "recapitalization" or "equity rollover" structure.

Key characteristics:

• Partial liquidity — The owner takes meaningful chips off the table (often 60–80% of equity value)
• Equity rollover — Remaining equity is rolled into the new structure, often with enhanced value due to PE operational improvements
• Continued involvement — The owner typically stays on as CEO or in a leadership role
• Multi-exit opportunity — The "second bite" at exit can generate significant additional returns when the PE firm exits 3–7 years later

This structure appeals to owners who want to de-risk their wealth, maintain involvement, and potentially benefit from value creation alongside a well-capitalized partner.

Understanding Equity Rollover and the "Second Bite"

One of the most misunderstood aspects of PE partnerships is the equity rollover and its potential upside.

When an owner sells to private equity, they typically receive:

• Cash at close — Immediate liquidity for a majority of their equity
• Rollover equity — A meaningful stake (10–40%) in the new entity at a reset, lower basis

If the business grows successfully under PE ownership and exits at a higher valuation in the future, the owner's rollover equity can generate returns that rival or exceed the initial transaction. This is the "second bite of the apple."

When Does a Partnership Structure Make Sense?

A private equity partnership is not appropriate for every owner or every business. Consider this path if:

• You want meaningful liquidity but aren't ready to fully exit
• You believe the business has substantial growth potential with additional resources
• You're comfortable remaining in a leadership role under new governance
• You're willing to accept continued risk exposure in exchange for upside participation
• The business is positioned in a consolidating or high-growth sector attractive to PE

Conversely, a traditional full exit may be more appropriate if you're ready to fully transition out, want complete liquidity, or prefer not to operate under PE ownership structures.

What Changes Under PE Ownership?

Owners considering a PE partnership should understand what shifts operationally and culturally:

• Governance — You'll report to a board with PE representation and defined oversight
• Strategic planning — Growth plans will be formalized, with clear targets and timelines
• Operational rigor — Expect enhanced reporting, KPIs, and accountability structures
• Growth investment — Access to capital for acquisitions, hiring, technology, and expansion
• Exit timing — PE firms operate on 3–7 year hold periods, creating a defined horizon

For operators who thrive in structured, growth-oriented environments, these changes can be energizing. For those who value complete autonomy, they can feel restrictive.

Final Considerations

There is no universal "right" path. The decision between a traditional exit and a PE partnership depends on personal goals, business readiness, market timing, and risk tolerance.

What matters most is entering the conversation with clarity: understanding the structural differences, evaluating your own readiness for continued involvement, and ensuring that the partnership—if pursued—aligns with your long-term objectives.