Private Equity's Growing Pushback from Small Business Owners

Private equity (PE) firms have increasingly targeted small businesses across various sectors in the United States, including plumbing, landscaping, and traffic safety services. This trend has intensified as technology enables PE firms to streamline operations through digital tools, allowing them to penetrate markets previously dominated by independent operators. For instance, the landscaping industry has seen a notable surge in buyouts, prompting trade publications to track these mergers and acquisitions closely. In 2022, buyouts of businesses valued at $100 million or less reached $89 billion, reflecting a 56% increase since 2015, according to PitchBook.

Bloomberg

Despite the financial allure of selling to PE firms, many small business owners are resisting these buyout offers. Jay Cunningham, owner of Superior Plumbing in Atlanta, exemplifies this sentiment, stating that selling would negatively impact his employees and community. He has actively promoted his business as "Still Locally Owned & Operated," signaling a clear stance against PE ownership. This resistance is echoed by other business owners, such as Craig Jacomine, who advocates for local partnerships over selling to PE, citing concerns about loss of control and increased debt.

Bloomberg

As baby boomer business owners approach retirement, an estimated one million small and midsize companies will be available for sale by 2035, valued at up to $5 trillion. This demographic shift has heightened the urgency for PE firms to acquire these businesses, yet it has also intensified backlash from owners who view their companies as integral to their identities. Michael Strain from the American Enterprise Institute notes that the emotional investment owners have in their businesses contributes to the growing resistance against PE buyouts.

Bloomberg

Supporters of private equity argue that these firms can provide essential capital, fostering growth and innovation within small businesses. Will Dunham, president of the American Investment Council, claims that PE-backed companies tend to offer higher wages, better benefits, and increased job creation compared to their non-PE counterparts. However, critics highlight potential downsides, such as rising prices for consumers, a focus on profit over community welfare, and the risk of layoffs.

Bloomberg

While proponents of private equity emphasize the benefits of modernization and job creation, dissenting voices point to the negative consequences experienced by businesses that have undergone buyouts. Owners like Jacomine report that selling to PE firms can lead to a loss of operational control and increased financial pressure, which may ultimately harm the community and the business's long-term viability.

Bloomberg

The ongoing pushback against private equity indicates a significant cultural shift among small business owners who prioritize community and employee welfare over financial gain. As the landscape of small business ownership evolves, the tension between independent operators and private equity firms is likely to persist, shaping the future of the American economy.

Bloomberg