Frequently asked questions

Capstreet is a Houston-based private equity firm founded in 1990. It invests in business services companies and partners with growth-focused management teams through its Capvalue Framework®. Capstreet is an SEC-registered investment adviser. It says it has made 50+ platform acquisitions and 200+ add-on acquisitions over 30+ years.

Capstreet looks for companies with $3 to $15 million of EBITDA. It seeks entrepreneur-owned business services companies, primarily through majority investments, where entrepreneurs reinvest alongside Capstreet. The firm does not publish a revenue range or a check size. Read the deal criteria, then call to talk about your company in confidence.

In a majority deal, yes, the investor takes control. Capstreet publishes "Primarily majority investments" and says entrepreneurs reinvest alongside it. It says it structures transactions so the founders retain an ownership stake. If keeping control matters most, a minority recapitalization may fit you better. Compare both before you decide.

It depends on size, growth and quality. GF Data, as reported by CapitalPad, found that private equity buyers paid an average of 6.4x EBITDA for $10 million to $25 million acquisitions in the first nine months of 2025. Your multiple may differ. Capstreet does not publish multiples. Read our guide for context.

Buyers start from adjusted EBITDA and apply a multiple that reflects your size, growth, margins, customer mix and management depth. Add-backs for one-time costs can raise adjusted EBITDA. Only a real offer tests the number. Capstreet does not publish valuation multiples, so use outside data and an advisor.

Bain defines buy-and-build as an explicit strategy for creating value by using a well-positioned platform company to make at least four sequential add-on acquisitions of smaller companies. Capstreet says it has completed 50+ platform acquisitions and 200+ add-on acquisitions. Owners of smaller firms can be add-on sellers.

BD Emerson says a platform is the first acquisition in a sector, sized and staffed to be the base for the others. An add-on is any later acquisition merged into the platform. If your company is large and well run, you may be a platform. A smaller firm may be an add-on.

Commonfund says growth equity deals typically do not involve taking full control or adding a lot of debt, while most buyouts are leveraged and give the buyer control. Capstreet publishes "Primarily majority investments," so it sits closer to the buyout side. Compare both against your goals.

A management buyout is a deal where your existing management team buys the business from you. MBO Ventures says it is typically financed with the team's own capital, bank debt and sometimes private equity. It keeps the company in familiar hands, but the team may struggle to match an outside buyer's cash price.

No. MBO Ventures says management buyouts are typically financed using the team's own capital, bank debt and sometimes private equity. Private equity helps when your managers cannot fund a purchase. Compare an MBO, a private equity sale and a hybrid before you choose. Capstreet does not publish an MBO program.

Sell to private equity if you want cash now, a partner with capital and a chance to share in future growth. Look elsewhere if you want a clean all-cash exit, full control or no board. A strategic buyer, a management buyout or a minority deal can fit better. Compare them against your goals.

Benefits include cash at close, a partner with capital and a second payout if your rolled equity grows. Risks include less control, a board and reporting, and a later sale. First Citizens says PE firms typically operate on a 3- to 7-year exit horizon. Rolled equity can lose value, and nobody can promise a second payout.

The steps are usually an introduction, a data request, a letter of intent, due diligence and closing. You share financials, agree on price and structure, and the buyer checks the company. Alpine Investors lists diligence workstreams such as quality of earnings, operations, tax, HR and legal. Start by preparing your numbers and your management team.

Often, but not always. Axial says PE firms generally make a lower offer than a strategic buyer, and Simon Quick Advisors says strategics generally pay more cash up front. Private equity can offer rollover equity and a second payout. Compare total value, not only cash at close. A competitive process shows real prices.

Rollover equity is a deal structure where you keep part of the sale value as an ownership stake in the company instead of taking all cash. Carta says founders and other shareholders forgo full liquidity and take a portion of the proceeds as equity after the sale. The stake can grow or shrink with the company.

It is the second payout from the equity you keep after a sale. Bean Kinney says rollover equity is often described as the founder's opportunity for a "second bite at the apple." You take cash at close, and your rolled stake pays out when the investor later sells. Nobody can promise that result.

It varies by deal, and no fixed standard exists. Parkland says a founder typically rolls 20% to 40% into the new capital structure in a majority recap. Capstreet says entrepreneurs reinvest alongside it, but it does not publish a required percentage. Negotiate the amount together with price and your role.

An earnout is part of the price paid after closing only if the business meets agreed targets. Auxo Capital Advisors defines it that way. Cantrell says most earnouts last between one and three years, and a 2025 Harvard corpgov post says the median is 24 months outside life sciences. Negotiate clear targets.

A letter of intent sets the main terms of a deal, such as price, structure and timing, before the buyer finishes due diligence. Most of it is usually non-binding, but some parts, such as exclusivity or confidentiality, often bind you. Ask your lawyer which parts bind you before you sign.

Cash at close is generally taxable in the year of the sale. Rolled equity can sometimes defer tax, depending on the structure. Website Closers notes that deferral is not forgiveness, since tax comes due when you sell the rolled shares. Tax rules vary, so ask your own tax adviser and lawyer.

In a majority recapitalization you sell 51% or more of your company, usually to a private equity firm, and the investor takes control. You keep a smaller stake as rollover equity and often stay on to run the business. You get cash now and a second payout when the investor sells.

A majority recap sells 51% or more, and the investor controls the board. A minority recap typically sells 20% to 49%, and you keep control. More cash today means less control, per Website Closers. Capstreet publishes "Primarily majority investments" in its criteria.

No. Ad Astra calls a recapitalization a partial sale. You are paid for the stake you sell and keep equity, so you share in future growth and a later sale. A full sale ends your ownership. A recap keeps you invested, whether the deal is majority or minority.

Website Closers says minority recaps typically involve selling 20% to 49% of the company. The right amount depends on how much cash or growth capital you need and how much control you want to keep. Sell no more than the plan needs, then check the investor's veto rights.

It depends on the documents. In a majority recap, Website Closers says the investor controls the board. In a minority recap, protective provisions can give the investor veto rights over major decisions, including replacing the CEO. Ask your lawyer to map who decides what before you sign.

A dividend recapitalization is a deal where a company raises new debt or capital and uses the money to pay owners a dividend. You take cash out without selling the whole company. The new debt raises risk if cash flow falls. Capstreet's published criteria say nothing about dividend recaps, so ask us directly.

Ask for references from owners who sold to the firm, and ask what happened after closing. Meet the people who will sit on your board. Ask how the firm treats management, how much debt it adds and how it plans to sell. Our guide lists the questions to ask before you sign a letter of intent.

A quality of earnings report is a review of your financials that tests whether your reported earnings are accurate and repeatable. Alpine Investors lists it as the finance and accounting workstream in diligence. Buyers use it to check EBITDA before they close. Clean books and clear add-backs make it go faster.

First Citizens says PE firms typically operate on a 3- to 7-year exit horizon. Capstreet does not publish its own hold period. It says it focuses on building businesses that can succeed "well beyond our ownership period." Ask any firm how long it expects to hold and how it plans to exit.

No buyer can promise every role. Capstreet says it looks for a tenured team of owners or managers and treats its management teams as true partners. In its own words, its goal is growth, not cost-cutting, so it builds on what already works. Ask any buyer what it plans for your people before you sign.

Often yes, but agree on your role before the letter of intent. Capstreet says that before closing, owners should align with a partner on their Day 1 role and how their involvement may change over the next three to five years. If you plan to retire soon, say so up front, because the buyer will need a plan for who leads.

Results vary by firm, so judge the method and the people, not the pitch. Capstreet publishes its Capvalue Framework®: Research, Build Scalable Platform and Drive Business Transformation. It also says there can be no guarantee it will succeed in applying it. Ask any firm for references from founders.