What Sellers Should Understand Before Partnering With Private Equity
On this episode of the Poised for Exit Podcast, host Julie Keyes sits down with Ben Axelrod, Managing Director of Borgman Capital, to discuss how business owners should evaluate prospective private equity partners. While transaction value is always a consideration in the lower middle market, a successful sale involves much more than purchase price. For founders and family owners, business transitions are deeply personal events tied to identity, legacy, employees, and long-term continuity.
Axelrod shares his insights on debunking common industry misconceptions, navigating family business dynamics, and explaining how Borgman Capital utilizes an independent sponsor model to offer customized transaction structures. By approaching investments as long-term partnerships, Borgman Capital focuses on backing strong existing management teams and pacing operational improvements as deliberate evolution rather than abrupt overhaul.
Listen to the full conversation to learn how lower middle market business owners can evaluate investor fit, preserve company legacy, and navigate the emotional realities of a transition.
Key Takeaways
Private Equity Firms Are Not Interchangeable
A common misconception among business owners is that all financial buyers operate the same way. In reality, private equity groups vary significantly in their capital structures, investment horizons, and post-acquisition strategies. While some firms rely on heavy financial engineering or aggressive rollup models, Borgman Capital provides flexible capital and long-term alignment tailored to each company. Business owners should evaluate a prospective buyer's operating style and values as carefully as the purchase price to ensure a successful long-term fit.
Business Transitions Are Human Events, Not Just Financial Transactions
For founders and closely held family businesses, selling a company involves emotional and personal considerations that extend beyond valuation. Fear of losing control, concern over employee continuity, and anxiety about post-sale identity can derail a deal if left unaddressed. Successful transactions require empathy, trust, and clear communication regarding life after closing. Private equity partners must recognize that incumbent management teams hold vital operational knowledge and treat the transaction as a true partnership.
Pacing Improvement as Evolution Rather Than Overhaul
Acquisitions do not require ripping out existing culture or changing operations overnight. Borgman Capital targets stable, well-run companies in niche manufacturing, distribution, and B2B services rather than turnaround situations. Value creation is approached as a gradual evolution, making quiet process improvements, adding key talent, and scheduling larger organizational shifts around planned leadership retirements. Pacing change thoughtfully protects company stability and helps retain critical employees who serve as the lifeblood of the organization.
The Independent Sponsor Model Offers Structural Flexibility
Unlike traditional committed funds that operate under fixed five-year investment and exit cycles, independent sponsors raise capital on a deal-by-deal basis. This model frees the firm from rigid fund timelines and allows for customized transaction structures, governance, and holding periods tailored to the specific needs of the business owner. Founders who wish to retain equity or transition out gradually benefit from a partner who can adjust the pace of ownership without artificial exit deadlines.
Questions Addressed in the Conversation
What questions should a business owner ask when interviewing a prospective private equity partner?
Sellers should look beyond purchase price to evaluate three practical questions: Do I like and trust these people enough to work with them? Will the firm prioritize my business and provide sufficient leadership bandwidth? Where will the firm draw depth and resources if the company faces a challenge or needs operational assistance? Understanding these factors helps ensure the investor aligns with the owner's goals for employees, location, and company legacy.
How does evaluating a family-owned business differ from a single-founder business?
Family-owned business transactions require careful assessment of family dynamics, particularly across multiple generations. Investors must determine whether family members working in the business possess the capability and genuine desire to remain in their roles, or if they are involved simply due to lineage. In contrast, evaluating a single-founder business focuses more on whether the founder has a clear vision for the company's future and understands why a transaction is the right path to achieve it.
From the Conversation
“The deals, the transactions, they’re about people. They’re about identity, trust, and empathy, not just terms.”
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This transcript has been edited for clarity and readability. Please refer to the original podcast recording for the complete conversation.
Introduction & Career Background
Julie Keyes: Welcome everyone to the Poised for Exit podcast show. Our guest today is the managing director of a private equity firm in the Midwest whose seller-centric approach has helped carry on the legacies of many companies in its portfolio.
We're here today with Ben Axelrod, who's the managing director of Borgman Capital. Ben, welcome to Poised for Exit.
Ben Axelrod: Good afternoon. Thanks for having me on your show.
Julie Keyes: I really do like to start by asking my guests to give us an idea of how you got here. What was your career path, and what was it that drew you to being in the private equity space?
Ben Axelrod: Happy to share that. I started my career in M&A. My first exposure was actually when I was still in school. I had an opportunity to stop out of school when I was in Frankfurt, Germany, and worked at an investment bank there for a semester. That exposed me to helping family-owned businesses. Size-wise, it's a little bit different in Europe, but they tended to be a bit smaller—what we would define as lower middle market.
When I finished my undergrad, I started my career in M&A advising technology companies in the pre- and post-.com era. Then I moved to working with more middle market private equity funds, as well as some larger businesses.
After a number of years of doing that, I shifted away from institutional private equity in the middle market more towards working with closely held, founder- and family-owned businesses, where the decisions around the transaction and decision-making are far more personal and stakes extend beyond valuation. That gradual shift made me realize that I wanted to be on the ownership side—where you get the chance to stay with management and really put into action all the opportunities that you discuss during the process and live with the consequences of the decisions you make together.
That ultimately brought me to Borgman Capital. I worked with Sequoya Borgman, the founder of Borgman Capital, on a transaction about four years before joining Borgman Capital in the Twin Cities about three years ago.
Julie Keyes: That's kind of how it is, right? Because you get to test the waters with each other first and then go, "Hey, I think this would be a great place for me to hang my hat."
Ben Axelrod: We stayed in touch after that successful investment, and I actually made investments as a limited partner of Borgman Capital after that first one, so it was an organization I was familiar with.
Debunking Misconceptions About Private Equity
Julie Keyes: There are many misunderstandings and misconceptions about private equity and the preconceived notions that many people have—not just owners, but some of their advisers, too. What are some of the things that come up in conversations that you help explain?
Ben Axelrod: Whether they're misunderstandings or generalizations, it's not surprising given just how many private equity funds, independent sponsors, family offices, and financial buyers are out there. But there are some that come up pretty consistently.
One of them is this fear of losing control—this belief that there's going to be an overnight change where the culture is going to get ripped out and everything is going to be governed by spreadsheets. I think that is a real fear. In reality, for most private equity groups out there, the pace of change can often become slower, not faster, than sellers and business owners believe it's going to be.
A second misconception is that private equity firms are interchangeable. Fit matters, and it's something that business owners really should explore. There are some firms that focus on financial engineering, some that focus on rollup or buy-and-build strategies. It's not one-size-fits-all.
Our approach at Borgman Capital is to provide flexible capital and long-term alignment. That's how we go about it, which works for many business owners. Being able to cut through the misconceptions sets up a lot of business owners on the right path to selecting the right partner.
The Human Side of M&A Transactions
Julie Keyes: How were you influenced around the approach that you outlined? Was there a specific moment or conversation?
Ben Axelrod: It has been shaped over hundreds of conversations with business owners and founders, as well as seeing a lot of transactions from the advisory side in my career. The identity motivation for the exit and what life looks like after a transaction—which doesn't necessarily mean the business owner is no longer involved—are strong undercurrents that matter a lot.
I remember advising two brothers who were second generation. They had made a pact long before working with us that when one decided to exit, they both would. After working with them for a number of months, one brother kept repeating that he wanted to hold on longer, but because of the pact, it felt like he was trying to convince himself.
The irony was they sold the business, and the brother who wanted to step away actually ended up staying involved with the new partner for several years. The one who thought he would continue couldn't make it work because he couldn't play with somebody else in his sandbox.
These transactions are layered, emotional, and unpredictable. Deals are about people, identity, trust, and empathy—not just terms. Money matters in every sale, especially in the lower middle market, but these other factors can be just as important.
Julie Keyes: If those other things aren't addressed, they can derail a deal. Losing control and fear of losing identity are very real and need to be addressed. The people side of the business is really where all the value is—it's in the intangibles.
Ben Axelrod: From our approach, we're looking for partners. We're not coming in to run the business; we don't have that ability. We have to feel that we're partnering with people who see eye-to-eye with us.
Borgman Capital's Investment Strategy & Portfolio Growth
Julie Keyes: Is a company that has a plan to scale but needs capital to take it to the next level of interest to Borgman Capital?
Ben Axelrod: Absolutely. We focus on lower middle market businesses. We don't have a hard geographic focus, though we prefer the Midwest or Upper Midwest.
For some folks, the industries we look at might seem boring—niche manufacturing, distribution, and business-to-business services. Plenty of those businesses have been around for a long time and have stability, but they see opportunities that the business owner might not be at a point in life to take on the risk for.
Those situations are very interesting to us because we're looking to back strong management teams, founders, or families who are willing to stick around. They know that business better than we ever will. We don't try to come in and be the smartest people in the room. We rely on their experience, and we're there to bring capital and other resources to make the execution of those opportunities possible.
The Independent Sponsor Model in Practice
Julie Keyes: Share with us a company in your portfolio that has been a great fit and how things are going with them.
Ben Axelrod: As an independent sponsor, we raise capital deal-by-deal as opposed to a committed fund. We're not locked into a finite fund cycle—like five years to find businesses, five years to work with them, and then exit. We have the flexibility to customize the pace, governance, and structure to each transaction.
A good example is an investment partnership we've been in for a couple of years with a chemical distribution business. We partnered with an owner who has been in the business for 30+ years and an owner for 20. He didn't want to walk away outright yet, but he didn't want the pressure of sole ownership.
He continues to run the business. Unprompted, he tells us often that it still feels like his company. That doesn't mean we haven't helped. We've added sales talent, smoothly navigated the retirement of the lead finance person by bringing in a new controller, and made quiet process improvements that everyone was on board with.
We pace changes so that certain future adjustments will be made after the current president transitions into retirement. We strive for evolution much more than an overhaul.
Julie Keyes: That probably helps you retain key people, too.
Ben Axelrod: You're spot on. That's one of the biggest risks. We're not investing in turnaround or broken situations; we like steadiness and stability. Retaining the talent that serves as the lifeblood of the organization is critically important to us.
Navigating Family-Owned Dynamics
Julie Keyes: Speak to the difference between family-owned and non-family-owned companies, and how you approach them.
Ben Axelrod: Most of our experience has been with family-owned or founder-owned businesses. In family-owned businesses, you often have a next generation involved, which gets interesting when there are multiple familial relationships.
In those situations, we take more time to assess the dynamics. Are the family members involved doing the work, and do they aspire to be involved? We bought a business where five members of the fourth generation and one member of the third generation were involved. It became apparent through soul-searching that only one family member wanted to stay involved.
Once we understand that, we evaluate the non-family management team to see if they are empowered and if we can support them through the transition. It comes down to assessing whether family members are there because they are the next generation or because they are qualified and want to be there.
When working with a single founder without family dynamics, it's more about their clarity of vision. Do they know where they want the business to go, and do they understand why a transaction is the right way to get it there?
Key Questions Sellers Should Ask Private Equity Partners
Julie Keyes: What are some questions a business owner should ask a private equity firm if they are considering partnering with them?
Ben Axelrod: What a business owner should try to find out includes:
Do I like them? In situations where it isn't just about the last dollar, factors like preserving a location, the employee base, or the management team matter. You need to feel that you will enjoy working and interacting with them.
Will they prioritize me and my business? You want to ensure the firm has the team size, bandwidth, and ability to be a true resource to the management teams and owners who stay on.
Where will they find depth? If the business encounters a challenge or needs additional resources, you need to know where the firm will draw depth to support the company.
These are key things a business owner should understand about a private equity partner—whether they plan to remain involved or step away while caring deeply about legacy and their employees.
Julie Keyes: It's been a great interview. I really appreciate having you on the show, Ben. Thanks for joining us.
Ben Axelrod: Thank you for having me.
