Inc.’s annual list is your go-to resource for investors that have entrepreneurs’ backs — especially in a pandemic.

In May, as largely peaceful demonstrations over the killing of George Floyd were condemned by some who focused on sporadic violence and the destruction of a few small businesses, the satirical website The Onion published a story headlined “Protesters Criticized for Looting Businesses Without Forming Private Equity Firm First.” Private equity’s dismal reputation stems mostly from a subset of buyout firms that invested in distressed companies, like Toys “R” Us, that then failed. The reality is that most U.S. private equity firms are interested in helping businesses grow, not grinding them to dust. To get the truth about PE, all you have to do is ask the founders who have used it to help them grow their companies while retaining an ownership stake.

So that’s what we did.

Inc.’s second annual list of founder-friendly private equity firms shines a light on 50 shops that have had success supporting founder-led companies. To compile the list, we once again went straight to the source: entrepreneurs who have sold to private equity. It’s a group that’s been expanding for more than two decades. In the U.S., the number of PE-backed businesses has grown 30 percent compared with 2015, according to research firm PitchBook.

While new private equity investments have slowed meaningfully since the onset of the pandemic, PE firms, armed with record amounts of capital, are completing more add-on acquisitions, which fold businesses into existing portfolio companies.

Inc.’s Guide to the Top 50 Founder-Friendly Private Equity Firms

Reproduced with permission of:

PRIVATE CREDIT & EQUITY | CAPITAL PARTNERS TEAM | ARTICLE REPRINT | NOVEMBER 2020

BY GRAHAM WINFREYSenior Editor, Inc.

FROM THE NOVEMBER 2020 ISSUE OF INC. MAGAZINE

2 MORGAN STANLEY INVESTMENT MANAGEMENT | PRIVATE CREDIT & EQUITY

ARTICLE REPRINT

For entrepreneurs who are now struggling, merging with a PE-backed rival could lead to the best outcome.

“We find a lot of situations where a PE firm will do an add-on acquisition and keep the founder on board,” says Dave Brackett, co-founder and CEO of private credit manager Antares Capital, which has helped finance acquisitions for more than 400 PE firms. One plus to having a PE partner today, he adds, is the chance to benefit from strategies developed by the other companies in the firm’s portfolio. “They can take the lessons learned in some of them that are going well and share them quickly across those 20 to 40 portfolio companies to get those businesses performing more quickly,” he says.

For founders, taking investment from a PE firm during a downturn doesn’t have to mean selling at a discount.

“You might think about a kind of delayed compensation arrangement in the form of earn-outs,” says Ben Persofsky, executive director of the Center for Family Business at financial services firm Brown Brothers Harriman. “Then there’s still a provision that you can get rewarded for a good performance, as if Covid never happened.”

In this time of uncertainty, if you are considering private equity, first decide what kind of support you need, and then identify firms with that specific expertise. “The comment ‘know your investor’ is probably doubly true now, particularly if it’s a family business or a business you’ve been running for a while and you really care about your people,” says Tom Stewart, executive director of the National Center for the Middle Market. “You want to do your human capital due diligence as much as your capital due diligence.”

3PRIVATE CREDIT & EQUITY | MORGAN STANLEY INVESTMENT MANAGEMENT

INC.’S GUIDE TO THE TOP 50 FOUNDER-FRIENDLY PRIVATE EQUITY FIRMS

Inc.’s 2020 PE 50 — The Best Private Equity Firms for Entrepreneurs

FIRM PORTFOLIO COMPANY ANNUAL REVENUE FOUNDED HEADQUARTERSAE Industrial Partners $1B and below annual revenue 1998 Boca Raton, FloridaAccel-KKR $10M – $250M annual revenue 2000 Menlo Park, CaliforniaAlpine Investors $5M – $100M annual revenue 2001 San Francisco, CaliforniaArgentum $5M – $25M annual revenue 1988 New York, New YorkBoyne Capital $10M – $100M annual revenue 2006 Miami, FloridaBrentwood Associates $25M – $500M annual revenue 1972 Los Angeles, CaliforniaClayton, Dubilier & Rice Typically invests $100M and above 1978 New York, New YorkClearview Capital $4M – $20M EBITDA 1999 Stamford, ConnecticutEnlightenment Capital $20M – $200M annual revenue 2012 Chevy Chase, MarylandFulcrum Equity Partners $3M – $50M annual revenue 2006 Atlanta, GeorgiaGauge Capital $5M – $40M EBITDA 2013 Dallas, TexasGranite Creek Capital Partners $3M – $15M EBITDA 2005 Chicago, IllinoisGreat Hill Partners $25M – $500M enterprise value 1998 Boston, MassachusettsHCI Equity Partners $20M – $200M annual revenue 2003 Washington, District of ColumbiaJMI Equity $10M – $50M annual revenue 1992 Baltimore, MarylandK1 Investment Management $100M and below annual revenue 2011 Manhattan Beach, CaliforniaKian Capital Partners $10M – $100M annual revenue 2013 Atlanta, GeorgiaL Catterton $5M – $1B annual revenue 1989 Greenwich, ConnecticutLLR Partners $10M – $100M annual revenue 1999 Philadelphia, PennsylvaniaLNK Partners $100M – $2B annual revenue 2005 White Plains, New YorkMainsail Partners $4M – $25M annual revenue 2003 San Francisco, CaliforniaMorgan Stanley Capital Partners $10M – $75M EBITDA 1985 New York, New YorkMountaingate Capital $5M – $25M EBITDA 2015 Denver, ColoradoNew Harbor Capital $3M – $15M EBITDA 2013 Chicago, IllinoisNewSpring Capital $10M and above annual revenue 1999 Radnor, PennsylvaniaNorthlane Capital Partners $5M – $30M EBITDA 2017 Bethesda, MarylandPfingsten Partners $20M – $150M annual revenue 1989 Chicago, IllinoisRedBird Capital Partners $10M – $100M EBITDA 2014 New York, New YorkRidgemont Equity Partners $50M and below EBITDA 2010 Charlotte, North CarolinaRiver Associates Investments $15M – $100M annual revenue 1989 Chattanooga, TennesseeRotunda Capital Partners $30M – $150M enterprise value 2009 Washington, District of ColumbiaSentinel Capital Partners $10M – $80M EBITDA 1995 New York, New YorkSerent Capital $5M – $100M annual revenue 2008 San Francisco, CaliforniaShore Capital Partners $5M – $100M annual revenue 2009 Chicago, IllinoisShoreView Industries $20M – $225M annual revenue 2002 Minneapolis , MinnesotaShorehill Capital $3M – $15M EBITDA 2013 Chicago , IllinoisSole Source Capital $35M and below EBITDA 2016 Los Angeles , CaliforniaSpectrum Equity Typically invests $25M – $150M 1994 Boston, MassachusettsStrattam Capital $10M – $30M annual revenue 2013 Austin, TexasSunstone Partners $10M and above annual revenue 2015 San Mateo, CaliforniaTPG Growth $50M and above annual revenue 2007 San Francisco, CaliforniaTVV Capital $10M – $150M annual revenue 1997 Nashville, TennesseeTZP Group $10M and above annual revenue 2007 New York, New YorkThe Riverside Company $400M and below enterprise value 1988 New York, New YorkTower Arch Capital $20M – $150M annual revenue 2013 Draper, UtahTrinity Hunt Partners $4M – $25M EBITDA 1993 Dallas, TexasTrivest Partners $20M – $200M annual revenue 1981 Coral Gables, FloridaVista Equity Partners $10M and above annual revenue 2000 Austin, Texas

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