Selling to PE vs. a Strategic Buyer vs. Family Transfer: Which Exit Is Right for Your Trade Business?

You have spent years building a trade contracting business worth something. Now the question is: what do you do with it? The three most common exit paths—selling to a private equity firm, selling to a strategic buyer (usually a competitor or larger trade company), and transferring to a family member—look very different in terms of valuation, timeline, tax treatment, and what happens to your business after you leave.

Option 1: Selling to Private Equity

PE firms have acquired 800+ trade contractors since 2022. They are the most active buyer category in the HVAC, plumbing, and electrical space, and they typically offer the highest multiples for businesses that meet their criteria.

Typical multiples: 4x–10x EBITDA, depending on size, recurring revenue, and owner dependency. Well-run platforms with $2M+ EBITDA and 30%+ recurring revenue can see 8x–11x.

Deal structure: Typically 60–80% cash at closing, plus an earnout (10–20% tied to post-sale performance) and rollover equity (10–25% retained ownership in the combined platform). The rollover component means you participate in the next liquidity event when the PE firm eventually sells the platform—which can be significant if the platform grows.

Timeline: 6–12 months from letter of intent to closing, depending on due diligence complexity.

What PE wants: Recurring revenue, low owner dependency, clean financials, stable workforce, diversified customer base, and documented systems. If your business is dependent on you personally, expect a lower multiple or a longer earnout to mitigate buyer risk.

After the sale: PE firms typically want the owner to stay for 1–3 years during the transition. Your brand may be absorbed into a platform brand. Your team may see changes in benefits, compensation, or reporting structure. The culture will change—how much depends on the specific PE firm.

Option 2: Selling to a Strategic Buyer

A strategic buyer is usually a competitor, a larger trade company expanding into your market, or a multi-trade operator adding your specialty. They buy your business to add revenue, customers, technicians, or geographic reach to their existing operation.

Typical multiples: 2.5x–5x SDE for smaller deals (under $1M EBITDA), 4x–7x EBITDA for larger deals. Generally lower than PE for comparable businesses because strategic buyers have less capital and less competition at the negotiating table.

Deal structure: More variable than PE deals. Can be all-cash, seller-financed (you carry a note for 20–50% of the purchase price), or a combination. Seller financing is common because many strategic buyers are contractors themselves who do not have deep pockets or institutional backing.

Timeline: 3–9 months, often faster than PE because due diligence is less formal.

What strategic buyers want: Customer lists, geographic coverage, technician headcount, and revenue. They are often less concerned about recurring revenue ratios and financial sophistication and more focused on how quickly they can integrate your operations into theirs.

After the sale: Your brand likely disappears—absorbed into the buyer's company. Your employees may be retained or may face redundancy if roles overlap. The transition period is typically shorter (6–12 months), and the owner's involvement post-sale is less structured.

Option 3: Family Succession

Passing the business to a child or family member is the dream for many contractor-owners. It keeps the legacy alive, preserves the culture, and avoids the emotional complexity of handing your life's work to a stranger. It is also the most financially complex exit path and the one most likely to fail.

Typical valuation: Family transfers often happen at a discount to market value—sometimes significantly. The "price" may be structured as a long-term installment sale, a gift with annual exclusions, or a combination of sale and estate planning tools. Fair market valuation is still required for tax purposes, but the terms are typically more favorable than an arm's-length sale.

Deal structure: Installment sale to the family member (often over 10–15 years), sometimes with a self-canceling installment note (SCIN) or a grantor retained annuity trust (GRAT) for estate planning benefits. The successor typically pays for the business out of future business earnings, which means the business must be profitable enough to service the debt and fund operations simultaneously.

Timeline: 3–10 years for a well-planned succession. The biggest mistake in family transfers is compressing the timeline—rushing the handover without adequate preparation leads to operational failures, family conflict, or both.

The critical requirement: The successor must be genuinely capable and willing to run the business. Desire is not enough—they need operational competence, financial literacy, leadership ability, and the respect of your team. Without that, a family transfer destroys value rather than preserving it.

After the transfer: You maintain the relationship—for better and worse. Family dynamics become business dynamics. Clear governance structures, defined roles, and explicit decision-making authority are essential.

Side-by-Side Comparison

Factor	PE Buyer	Strategic Buyer	Family Transfer
Typical multiple	4x–10x EBITDA	2.5x–7x EBITDA	Discounted to FMV
Cash at closing	60–80%	50–100%	0–30%
Earnout / seller note	Common (10–20%)	Common (20–50%)	Installment over 10–15 years
Owner stays post-sale	1–3 years typical	6–12 months	Gradual over 3–10 years
Brand preservation	Maybe (platform dependent)	Usually absorbed	Yes
Employee retention	High priority for buyer	Variable (overlap risk)	Highest continuity
Tax planning complexity	High	Moderate	Very high
Prep time needed	2–3 years ideal	1–2 years	3–10 years

Which Path Is Right for You?

Choose PE if: you want the highest valuation, you have recurring revenue and low owner dependency, you are willing to stay 1–3 years, and you want the possibility of a "second bite" through rollover equity. PE is the best path for contractors who have built a true business—a system that operates without them.

Choose a strategic buyer if: you want a faster, simpler transaction, you are comfortable with seller financing, and the premium of PE is not available because your business is smaller or more owner-dependent. Strategic sales work well for contractors under $1M EBITDA who want a clean exit.

Choose family transfer if: you have a capable, willing successor, you value legacy and culture preservation over maximizing sale price, and you have time (5+ years) to plan and execute the transition properly. Family succession works beautifully when it is planned deliberately—and fails spectacularly when it is rushed.

Regardless of which path you choose, the preparation is largely the same: clean financials, recurring revenue, reduced owner dependency, and documented systems. A business that is ready for PE is also a better business to sell strategically, transfer to family, or simply keep running profitably. The work you do to prepare for an exit makes everything better, regardless of which door you walk through.

The best exit is the one you planned for. The worst is the one you were forced into. Start preparing now—whichever path you choose.

The Bottom Line

PE offers the highest multiples but demands the most preparation. Strategic buyers offer simpler deals at lower valuations. Family transfers preserve legacy but require the longest runway and the most careful planning. Each path has trade-offs, and the right choice depends on your goals, your timeline, and the current state of your business. What all three have in common: the better prepared you are, the better the outcome.