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Episode Summary
You want to sell. You’re somewhere between $500K and $2M of EBITDA, and every advisor you call is either too expensive to care about you or too cheap to actually help you. That gap is not an accident. It’s structural. I had Peter Lehrman back on the show, founder of Axial, the largest platform on the internet for buying and selling privately held companies, to dig into why the lower middle market is so broken and what’s actually changing. Peter walked through why selling a small business is fundamentally harder than selling a big one (less finance function, more deferred maintenance, smaller fees), why the best M&A talent constantly migrates upmarket leaving owners with a thin bench of advisors, and how the wave of capital chasing yield has reshaped who’s buying your size of company. We got into the rise of ETA buyers, search funders, and refugees from Fidelity and KKR who’d rather buy a chocolate business than raise another fund. The real punchline: this is great news for owners who actually prepare. Brutal news for owners who get fed up and try to sell in two months.
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## Top 10 Takeaways- The lower middle market gap is structural, not accidental. The best advisors keep moving upmarket where the economics actually work.
- Selling a small business is harder than selling a big one. Less finance function, more deferred maintenance, smaller fees.
- Public companies trade without anyone meeting the CEO. Private companies don’t trade until a buyer meets the owner.
- Your tax returns are not financial statements. A buyer’s diligence list is the bill for years of deferred bookkeeping.
- A cheap advisor who doesn’t know what they’re doing costs you more than an expensive one who does.
- Three years of preparation gets a different sale price than three months of “I’m done and want out.”
- Capital with nowhere to earn yield has compressed required returns and pushed buyers down market into your category.
- Your buyer pool now spans ETA searchers, ex-Fidelity operators, specialized PE, and strategics all in the same process.
- Generalist private equity is fading. Specialized PE that knows your industry cold is the new default buyer.
- An orderly market doesn’t mean every business gets the same price. It means every owner sees the real options.
Sound Bites
“You can never do a deal with a small business owner until you’ve met the owner. You have to meet them. There’s really no other path.” (@TBD) — Peter Lehrman
“The better you get at it, the more you want to move up market. And so there’s this constant flow of talent moving up market and saying, well, we only want to sell $25 million businesses now, or I only want to sell $50 million businesses now.” (@TBD) — Peter Lehrman
“There’s nothing worse with a CPA or an M&A or an attorney or someone that pretends to know what they’re doing and has no clue. They actually are probably doing more detrimental work on the seller’s behalf than the seller even knows.” (@TBD) — Ryan Tansom
“There’s no place to earn a return on your cash. As a result, a huge amount of capital has been looking to find a home in assets that can yield something attractive.” (@TBD) — Peter Lehrman
“Intentional should mean it’s deliberate. It’s measured. It’s carefully considered. You’re thinking through the lens of employees, through customers, through shareholders. There’s a real mindfulness that’s coming from the C-suite around the craftsmanship associated with business building.” (@TBD) — Peter Lehrman
About This Episode
Peter Lehrman is the founder and CEO of Axial, the largest platform on the internet for buying, selling, advising, and financing privately held companies. Since 2010, Axial has facilitated over 2,000 transactions and built a network with more than 10,000 financial investors, M&A advisory firms, and company executives active in the lower middle market. Before starting Axial, Peter worked in private equity at SSW Capital Partners and was part of the founding team at GLG (Gerson Lehrman Group), where he helped build the company’s global technology platform for on-demand business expertise. This is Peter’s second appearance on the show, and the conversation traces what’s actually changed in the M&A market for owners of small and mid-sized companies since the last conversation.
Resources Mentioned
- Axial — The largest platform for buying and selling privately held companies. — axial.com
- Middle Market Review — Axial’s free newsletter covering M&A in the lower middle market. — middlemarketreview.com
- GLG (Gerson Lehrman Group) — The expert network business Peter helped build before Axial.
- Shaker Hill — Boston-based investment firm started by two former Fidelity money managers who bought a chocolate business through Axial.
- Arkona Intentional Growth Digital Course — Episode sponsor. — arkona.io
- Brent Beshore — Referenced as a fellow operator helping educate the lower middle market.
Connections
Phase + Module:
- Module 2 — Expand Knowledge — Understanding how the M&A market actually works for owners of privately held companies
Milestones:
- Milestone 6 — Transaction Value — What the market will actually pay, who the buyers are, and how the process works
Concepts referenced:
- The Multiple & WACC — Why required returns have compressed and multiples have expanded
- Three Lenses of Value — Owner’s value, market value, and transaction value as distinct things
- Enterprise Value vs. Equity Value — What actually changes hands in a transaction
- Normalized EBITDA — The number every buyer is trying to back-solve from your tax returns
- Value Gap — The space between what owners think the business is worth and what the market will pay