Platform Acquisition: Why Private Equity Is Now Shopping for Businesses Like Yours
Private equity has started looking further down the market, and that changes the math for owners of well-run small businesses. In the second quarter of 2026, sponsors closed 413 US deals valued between $25 million and $100 million, and more of those buyers now want a founder-owned company as the platform acquisition itself, not just a small add-on. The question for an owner is simple. If a sponsor looked at your business this year, would they see a platform or a project?
The numbers come from PitchBook’s reporting on its latest US PE Middle Market Report. Those 413 deals added up to $16 billion in value, a quarter-over-quarter jump of 56.4 percent in deal count and 70.6 percent in deal value. It was the only size bracket in the US middle market that grew in Q2 2026. Every other bracket shrank or stalled.
Key takeaways
- As of Q2 2026, US private equity deals between $25 million and $100 million were the only growing segment of the middle market, according to PitchBook.
- Private equity firms are increasingly buying small founder-owned businesses to serve as the platform company in a buy and build strategy.
- In Q1 2026, US deals between $25 million and $100 million carried a median multiple of 8.5 times EBITDA, compared with 13.2 times for deals between $500 million and $1 billion, according to PitchBook.
- Owners who build clean reporting, a leadership team, and documented processes over 12 to 24 months are better positioned to be chosen as the platform.
What is a platform acquisition in private equity?
A platform acquisition is the first company a private equity firm buys in a sector, the one it plans to grow by adding smaller businesses over the following years. The platform supplies the leadership, systems, and reporting that every later acquisition plugs into. That makes readiness, not size alone, the deciding factor in which company gets chosen.
What is new in 2026 is who gets picked. Historically, sponsors hunted for a large, already integrated company and used it to roll up smaller peers. Now, advisers told PitchBook, sponsors are increasingly buying small founder-owned or family-owned businesses to serve as both the platform and the add-ons.
How does a buy and build strategy work?
A buy and build strategy is a private equity approach where a sponsor buys one platform company, adds smaller companies in the same industry, combines their back offices, and later sells the larger business at a higher multiple than the pieces were worth separately. The smaller companies bolted on are called add-on acquisitions.
Bain & Company describes the math behind it as multiple arbitrage. Smaller companies consistently sell for lower multiples than larger ones, so each add-on lowers the sponsor’s average purchase price. At Buy And Build Advisors, a firm that shares its name with the strategy, we have spent years watching it work, and watching it stall, from inside the companies involved. When it stalls, the cause is rarely the capital. It is almost always the platform, a company that could not absorb what was added to it.
Why is private equity moving down market in 2026?
Private equity is moving down market in 2026 because smaller deals cost less to enter and there are fewer large companies worth buying. PitchBook points to two main forces behind the shift.
The first is an exit bottleneck. Fewer sponsors are putting their own portfolio companies up for sale, which leaves buyers with a thin supply of scaled businesses. The few that do come to market tend to carry high price tags.
The second is caution. Market volatility this year, including a reset in tech valuations and geopolitical tension that pushed up energy costs and inflation, has made many firms hesitant to write big checks. Paul Mahoney, a private equity partner at the law firm Troutman Pepper Locke, told PitchBook that buyer diligence on larger deals has become more demanding. PitchBook adds that deals are taking longer to close, with earn-outs increasingly used to close the gap between buyer and seller price expectations.
Mahoney also named the sectors where this approach is gaining ground: industrial services, insurance brokerage, and residential services. Those are fragmented industries full of small, owner-run companies that each keep their own books, their own payroll, and their own way of doing things. If you run a company in one of those industries, these buyers are studying you.
What does the $25 million to $100 million range mean for a lower middle-market owner?
The $25 million to $100 million range describes what a deal is worth, not how much revenue a business brings in. A company with $20 million in revenue and thin margins may sit well below it. A company with $12 million in revenue and strong, clean earnings may sit inside it.
PitchBook data shows that in Q1 2026, companies in the $25 million to $100 million range traded at a median of 8.5 times EBITDA. At that multiple, a $25 million deal implies earnings of roughly $3 million a year. Christopher Sheaffer, global vice chair of Reed Smith’s private equity group, told PitchBook that smaller founder-owned businesses typically trade at four to eight times EBITDA.
If your business earns less than that, the trend still applies to you. Sponsors are buying small founder-owned companies as add-ons too. There are two doors into a private equity deal, and both lead to the same conversation. The buyer is going to ask how much work it will take to make your business part of something bigger.
Why do private equity firms pay lower multiples for smaller businesses?
Private equity firms pay lower multiples for smaller businesses because smaller companies carry more risk and need more work after the deal closes. The sponsor’s plan is to buy at the lower multiple, build, and sell at a higher one.
PitchBook sums up the trade-off as lower entry multiples, but harder work. Sheaffer noted that integrating founder-owned businesses often demands more hands-on effort from the sponsor. Some firms are willing and able to do that. Many would rather buy a business where less of that work is left to do.
That is where an owner has real influence. You cannot change the sponsor’s playbook. You can change where you sit in it. A business with messy books, no management layer, and an owner who holds every key relationship gets priced as a project, with every fix the sponsor will have to make discounted out of the offer. A business that already runs like a platform gives the buyer fewer reasons to discount and more reasons to compete.
No one can promise an owner a specific multiple. What we can say from experience is that the business with fewer surprises in diligence tends to keep more of its number at the table.
What makes a founder-owned business platform-ready?
A platform-ready business can absorb other companies without breaking, which means it runs on systems and people rather than on its founder. When Buy And Build Advisors evaluates a company, five areas tell us almost everything.
Financial reporting a buyer can trust. Monthly closes that happen on time, accrual-based statements, and earnings that hold up under a quality of earnings review. If your numbers need a story to explain them, a buyer will write their own story, and it will not favor you.
A leadership layer below the owner. A platform has to lead the add-ons, so the sponsor needs people in place who can run operations, finance, and sales without the founder in every decision. This is the single biggest gap we see in owner-run companies.
Processes that live outside someone’s head. Documented workflows for how you quote, hire, schedule, and deliver. Add-ons get integrated into those processes. If they only exist in the owner’s memory, there is nothing to integrate into.
Revenue that does not depend on a few relationships. Customer concentration and owner-held accounts are two of the fastest ways to lower an offer. Buyers want to see that customers stay because of the company, not because of one person.
Clean structure and contracts. Entity setup, customer and vendor agreements, leases, and employment terms that can transfer without surprises. Legal loose ends found late in diligence slow a deal down and hand the buyer an easy reason to lower the price.
This is the core of building transferable value before an exit, now with a clearer buyer attached.
Illustrative example. Two residential services companies in the same metro area each bring in about $15 million in revenue. The first owner still approves every estimate, keeps the books on a cash basis, and personally manages the three largest commercial accounts. The second owner spent two years putting a controller in place, moving to monthly accrual reporting, promoting a general manager, and spreading key accounts across a small sales team. When a sponsor enters the market looking for a platform, the second company becomes the anchor and the first becomes a possible add-on, priced lower to reflect the work ahead. Same industry, same revenue, very different conversations.
How long does it take to get a business ready for private equity?
Plan on at least 12 to 24 months to get a business genuinely ready for a private equity buyer, and longer if the leadership team and reporting need to be built from scratch. Many Certified Exit Planning Advisors recommend starting three to five years before a sale. You cannot hire a general manager and prove they can run the business in a single quarter.
Every founder thinks they have more time than they actually do. The business always feels like it needs just a little more work before it is ready, so the preparation gets pushed. Meanwhile, buyer appetite moves on its own schedule. PitchBook notes that the November 2026 midterm elections could add new uncertainty for some sectors. The window that is open today may look different in a year.
The work pays off whether or not you sell to private equity. A business that runs on systems and people is easier to own, easier to grow, and easier to step back from. That is the work we do with owners on the Build side of our firm, bringing clarity to the numbers and structure to the operations so the business is stronger now and worth more later.
Clarity before capital
Private equity capital is coming down market in 2026, and it is looking for founder-owned businesses that can carry a growth plan. Capital does not create value on its own. It amplifies whatever is already true inside a company. If the business is clear, organized, and led by more than one person, the capital accelerates it. If it is not, the capital finds the gaps and prices them.
So here is the question worth sitting with. If a sponsor called next quarter, what is the first thing they would need to fix in your business?
Know where your business stands before a buyer tells you. The free Value Gap Assessment shows what your business may be worth today, where risk may be holding that number back, and what to strengthen first. It takes about fifteen minutes.
The Value Gap Assessment is indicative and not intended as a formal valuation. Results are based on the inputs you provide.
