Kentucky’s legal firms are helping business owners negotiate the sale of a lifetime
By Shannon Clinton, The Lane Report
For business owners contemplating selling their business in the next few years, the active preparation starts now, merger and acquisition attorneys advise. And before it ends, the sales process may evolve into another full-time job in itself, in addition to still running the business, according to Brian A. Cromer, chair of Stites & Harbison’s Business and Finance Service Group for all Stites & Harbison offices.
Kentucky has a bounty of middle-market family-run or founder-run businesses that are good at what they do, making them good candidates for a deal.
Popular liquidity strategies have shifted for owners wanting to monetize what they’ve built or pursue an exit strategy, said Cromer, who has spent around 25 working with business-sale transactions. Selling shares in an initial public offering (IPO) is shifting — under the right conditions — toward selling their business on the private-equity market as a viable exit strategy.
“That has been quite different and it can be a fabulous thing for business owners at the right stage of their careers,” said Cromer, who is often brought in for high-value transactions. He has been involved with past deals that closed with New York–based global investment firm Blackstone and the Pritzker family of Illinois.
What PE firms look for in a deal
Private equity firms are, simply put, investment management companies with funds in hand from a variety of investments and investors — and they’re on the hunt for companies to acquire.
The PE group’s goal is to strategically raise the acquired company’s value over a number of years with the intent to resell it at a profit or take it public, ultimately delivering returns to stakeholders.
Generally, the PE party has a significant amount of cash on the balance sheet and is always actively looking for transactions. They usually fall into two main types: those looking for purely financially beneficial opportunities or strategic buyers looking to acquire a business within its own industry.
So-called “platform companies” might represent a particular sector and look for acquisitions within their targeted area. Cromer said he’s participated in such transactions with health care, engineering, professional services, insurance, construction, automotive services and other companies. Generally speaking, though, there’s no limit to the type of companies that may be acquired by private equity firms, from allergy treatment centers to PR firms.
“Above all else, investment groups look for target companies that are stable, both with regard to financials and ownership/management,” said Christopher W.D. Jones, a corporate partner at Dentons, a global law firm with offices in Kentucky. “This means an established business with a strong market position, consistent revenue streams and healthy profit margins, manageable debt levels, scalability, a management structure independent from ownership, and clear visions and plans.”
Cromer added that buyers will scrutinize a business’s EBITDA (earnings before interest, taxes, depreciation and amortization) during the process to gauge profitability and potential.
Sometimes an investment fund will acquire a percentage of total equity in the company, buying a class of stock to set up as preferred stock. In such cases the buyer would want to have representation on the company’s board of directors, enhanced access to financial accounts and other records, and leeway to use their own expertise toward growth opportunities for the company. Then later, if the more highly valued company sells entirely to another party, the investment firm stands to gain proportionately from this ownership stake.
PE acquisitions are on the rise
Private equity is playing a bigger role in U.S. dealmaking. According to the 2025 Deal Terms Study by SRS Acquiom, PE-backed companies now account for 36% of all private company acquisitions, up from 28% in 2023. The overall number of PE acquisitions increased by 8% last year, with the average transaction value rising from $158.1 million in 2023 to $282.6 million in 2024. In comparison, the average transaction value of acquisitions by private firms without ties to private equity decreased by 22% in the same time frame, from $128.2 million to $114.2 million.
Jones says the data underscores how common PE acquisitions have become. Still, certain factors must be in place for a PE groups to want to take the leap. That’s where attorneys can help educate business owners and during negotiations, find that potentially fertile common ground.
In Cromer’s mergers and acquisitions work, a “significant portion” of the deals involve PE. This can be representing groups looking nationwide for opportunities to buy, but more often in this region of the country he represents sellers in PE transactions.
Tom Rutledge, a member of the business services group at Stoll Keenon Ogden, said his group represents companies that are being sold in part or in whole, not focusing specifically on the nature of the buyer.
Rutledge presented the example of an owner who founded a company years ago and grew it into a strong business. The owner would like to transfer the business to someone in management, but none of them are in a position to buy it and the owner isn’t interested in selling it outright.
A broker may be engaged, tasked with achieving a desired sale amount. A sales brochure will then be prepared and potential buyers identified — either companies already in the industry looking to expand or repeat buyers such as funds with experience in that market, Rutledge said. He added that all potential buyers are required to sign non-disclosure agreements to ensure confidentiality.
At this point, business owners must shift their focus to how they might appear to a potential buyer during this process. A broker may, for instance, examine financials and advise a business owner to make specified improvements within a certain time frame to make the company more attractive.
Jones said common red flags that should be addressed early include ownership disputes, incomplete financial records, and a history of failing to follow corporate formalities.
“The more time we spend resolving these issues up front, the smoother and more efficient the overall transaction tends to be,” he noted.
“It generally takes two to three months from the moment we are engaged by our client to close on the sale of the business to private equity,” Jones explained. “An attorney plays a role in every facet of the transaction, with our responsibilities including structuring of the transaction, drafting the purchase agreement and all ancillary documents thereto, negotiating legal terms, coordinating due diligence reviews of the target company’s information, and advising on matters of corporate governance and exit strategies.”
Depending on individual factors, it usually takes 60 to 120 days in the bids solicitation and offers evaluation phase, then another 60 to 120 days to complete the letter of intent (LOI) negotiations/signing, the buyer’s due diligence phases and other details encountered toward closing. However, it can take longer, depending on the circumstances, Cromer added.
Rutledge agreed, noting that the time frame to close a deal can vary widely — some in six months, some far longer.
“If it takes two years they shouldn’t be surprised,” he said.
Navigating the process
When the time comes to sell the business — regardless of whether it is being sold to an employee, family member or PE — an attorney should be actively involved throughout the process to tackle issues like employee agreements, rollover equity and more, Cromer said.
“The process for everyone involved becomes a full-time job, which makes running your business at the same time pretty challenging,” he said.
The owner must also decide whether to retire fully after the sale or stay involved in parts of the business. For some, reporting to new ownership for the first time in their career can be a surprising adjustment.
Rutledge said sometimes PE buyers prefer an owner to stay on for at least a specified amount of time during the transition period or longer as an employee to maintain customer relations. That’s all hashed out during negotiations.
While there’s some small PE fund activity in the Louisville area, Rutledge said business owners should expect buyers to be out of state due to a concentration of PE funds on the East Coast and West Coast and big cities like Chicago.
With the rapid growth in PE acquisitions, area legal firms stand ready to advise business owners to research and remedy issues, weigh options and avoid pitfalls in this delicate dance, when someone’s life’s work is basically up for bid.
“It is important for individuals either planning future exit strategies or beginning the process of exploring a sale to fully understand the nature of private equity acquisitions and ensure their company is appropriately situated,” Jones said.
