Picking Private Equity Partners: Alignment is Key When Looking for Investors

Thanks to private equity (PE), Matt Buckwalter finally gets to use the psychology degree he earned in college. 

A few years ago, he bought out his partner and proceeded to grow Punctual Pros, which includes One Hour Heating & Air Conditioning, Benjamin Franklin Plumbing, and Mister Sparky. Buckwalter expanded the company to cover 17 territories and 230 ZIP codes in Pennsylvania. 

He had plans to grow beyond his state’s borders and wanted more opportunities for his management team while taking some of his risk off the table. He also wanted to achieve his vision for what Punctual Pros could become.

In addition to relying on his 25 years of business experience, Buckwalter worked with attorneys, accountants, and other advisors to prepare his business for sale. He then connected with Boxwood Partners, an investment bank that created a comprehensive overview of Punctual Pros and got the word out to interested parties.

“I think we initially started with, believe it or not, about 80 firms and got it down to about eight,” Buckwalter says, “and then ended up settling on Broad Sky Partners. It was about an eight-month process.”

While his brother serves as president and operates the business, Buckwalter puts that psychology degree to work to fulfill the plan that led him to private equity.

“I work with the acquisition process, which is mostly the relationships. I own the relationships with the other business owners that would be looking to sell to our platform,” he says. “That’s where most of my time is spent: going out, sourcing deals, meeting people, taking them along through the process, and then ultimately getting the deal closed.”

Private equity firms have discovered plenty to like about franchising. While there’s always risk in business, a reliable and repeatable playbook from a strong brand can improve the odds for a successful venture. As proven many times over in the multi-unit era, franchises are often set up to scale. 

Franchisees have also learned there are benefits to private equity. For multi-unit franchisees who share Buckwalter’s goals, an injection of capital and expertise can be the ticket to growth that would not have been possible otherwise.

The right relationship is key. Griffin Gordon is the founder and CEO of Taurus Capital Partners, a private equity firm, and a founding board member and investor with Somersault Holdings, a franchisee with The Little Gym. His advice for anyone looking to team up with private equity is to do the due diligence to ensure everyone’s expectations are in alignment before finalizing the deal.

“Focus on specifically what the vision is that a private equity firm has for your business. Think about the upsides and downsides of what might happen if you enter into a partnership,” Giffin says. “I would be very focused on trying to get all of your questions answered in a way that gives you comfort.”

Money is a powerful motivator, but Gordon says it’s important to find a team that understands your values and goals.

“Be very thoughtful and clear-eyed about what your intentions are and what you’re looking for because I think what you’ll find is there will be people who probably flash some pretty gaudy numbers in front of you,” he says. “At the end of the day, that may or may not be what you need. What’s most important is what you’re trying to achieve.”

Time horizon

When private equity is involved, there’s often a ticking clock leading to a sale or recapitalization. Depending on market conditions, private equity deals often have a five to seven-year timeline, but that’s not always the case. Gordon learned about The Little Gym because his eldest daughter was taking classes. 

“I was very familiar with the concept and the value proposition,” he says. “That sort of sparked a deeper commitment.”

While some might say, “That’s an interesting business,” and then move on with their lives, Gordon took things to the next level after learning that a group of owners was selling locations.

“I had an opportunity to look deeper into Little Gym and get to know the owners who had grown seven wonderful locations in the Carolinas,” he says. “That’s really how I got more familiar with the business model and franchisee life in general.”

Under the Somersault Holdings umbrella, there are currently 22 locations, and Gordon’s not sure when he might sell them. There’s not a strict timeline. For now, he respects the business model, has a solid team in place, and continues to reinvest profits into the business.

“There are all sorts of flavors of private equity, right? Taurus is designed to be more of a longer-term orientation,” he says. “We’ll think about liquidity, whether that’s a partial sale or a full sale, because our investors want returns at some point, but we’ve got a tremendous opportunity, so we’re not in any rush.”

When Buckwalter sold 80% of his business to Broad Sky Partners, he joined the team. He attends board meetings and helps steer the organization. It’s no longer an us-and-them situation. 

“Whether we roll up the equity again or sell it to a different firm, that’s yet to be determined and probably predicated on market conditions,” Buckwalter says. “The plan is to sell. I’m a partner in that.”

And what’s the timeline?

“That transaction will probably happen at its natural time,” he says.

Franchising’s allure

Erik Herrmann is a partner and head of the investment group at CapitalSpring, which was founded in 2005. Over the years, CapitalSpring has worked with more than 100 founder-led businesses and injected more than $3.7 billion into them.

“The original founders grew out of more generalist private equity investing and kind of stumbled into the franchising space,” Herrmann says. “A friend of theirs was looking to raise money to buy a restaurant business. They identified what was a really large market and one that was underserved in terms of alternative capital.”

The franchising business model works for a variety of industries that are thoroughly woven into the U.S. economy. Restaurants, gyms, and service companies perform different roles, but they can all be franchised and scaled. In some ways, growth is built into the model, especially in the era of multi-unit ownership.

“It’s big. It’s growing. We see trends toward franchise businesses growing at the expense of nonfranchise businesses. We’re seeing market share move in that direction. There’s a lot of consolidation happening within franchising,” Herrmann says. “All that needs capital to support it. That creates a lot of business opportunities for firms like ours. We like the fact that it’s easy to invest in Main Street America while having the benefit of a proven tool kit.”

CapitalSpring doesn’t limit itself to franchising, but the business model checks a lot of boxes. Franchises are often customer-facing businesses, which the company appreciates. When compared to a nonfranchise startup company, franchises have battle-tested playbooks that have been tried in different locations and territories. Risk can’t be eliminated in business, but risk reduction is a point in franchising’s favor.

Brand names also have power, and consumers know what they like. The profitability of individual operators may vary, but overall, a strong brand that does well in its category attracts and retains customers.

“Investors are going to be looking at any business and saying, ‘What can I do with it? How can I build value? How can I grow it?’ You want to be able to tell a story,” Herrmann says. “You want to see all those possibilities and all that potential.”

Brian Alas, managing director at Boxwood Partners, helped connect Buckwalter with his eventual partners at Broad Sky. He’s another believer in franchising’s brand power. Private equity firms are attracted for some of the same reasons that franchisees go through the development process and sign on the dotted line.

“They get a chance to buy into and own some of the best brands in the world of franchising,” Alas says. “When private equity is involved, they want to really understand the franchise as well as the multi-unit franchisee they’re working with.”

The franchisees are another draw for private equity. While firms can help operators, they’re often not operators themselves. As CEO of Punctual Pros, Buckwalter brought his knowledge and experience to the deal. Founders and CEOs who built their businesses have vital roles to play as organizations continue to expand their reach.

“I always said that PE folks, for the most part, are not operators, right?” Alas says. “They’re not Buckwalters.”

Private equity advantage

When profiled in the Q4 2024 issue of Multi-Unit Franchisee magazine, Luke Andrus said, “…(W)e structure our company like a PE group. I can see us landing there in the future.” He’s the CEO of Blue Star Investments, which owns 57 Anytime Fitness locations, and he’d like for that number to increase rapidly someday.

“We place a heavy emphasis on EBITDA and exit strategy,” Andrus says. “I think that if the right offer came along and we trusted our partners, we would be willing to do it. And we don’t say ‘sell.’ We say ‘recapitalize.’”

Blue Star Investments began with this eventual recapitalization in mind. While there’s no defined timeline, Andrus says the way to get from 60 locations to 160 is to team up with private equity investors. 

Andrus referred to lessons he learned while reading by Stephen Schwarzman, chairman and CEO of the Blackstone Group, a global private equity firm. Private equity investments make it possible to take bigger swings than otherwise possible, Andrus says.

“The idea is I might be using other people’s money to buy these locations that will then be paid off by the business,” he says. “The larger I get, the more market share I have, and the more valuable I am.”

Of course, there are no guarantees, and just as the risk goes up when dealing with an emerging franchise, a new private equity group might not have the same experience as an established firm.

“They also have to make nice with Anytime Fitness, right?” he says. “They have an extra hoop to jump through, but anybody who’s worth their salt can.”

While Blue Star Investments isn’t ready to make a change yet, Andrus and his team have had conversations with multiple private equity groups, so relationships already exist. “Anytime Fitness would approve them,” he says.

Partnering with private equity goes beyond cash infusions. On its website, CapitalSpring lists some of the value it provides, including helping with acquisitions, networking, marketing, operations, technology, and vendors. Herrmann says his company’s processes have been tweaked and refined over the years to fuel efficient growth.

“You can’t manage through brute force once you get to a certain size, right? Have you made those investments in terms of processes and people and systems and that sort of stuff?” he says. “These growing pains are kind of inevitable as you scale a multi-site business. You can’t be in 800 places at the same time, so have you made those investments?”

Gordon with Taurus Capital and Somersault Holdings says it’s a balancing act to provide partners with both support and space. When CEOs and owners sell their companies, they still have the talents, skills, and drive that led them to grow their businesses in the first place.

“When they join us, we need to give them adequate space and room to go do what they do every day and not get in the way,” he says, “but I do think there are specific areas where we can be directly helpful.”

Gordon and his team can help with marketing, acquisitions, and a host of tactics and strategies to assist when expanding a business. And to prove that private equity firms exist on a spectrum, Gordon says members of his team have also served as boots on the ground when needed.

“We tend to be pretty operationally hands-on,” he says. “We’re here to roll up our sleeves and be helpful, and I think that’s probably different than institutional private equity.”

Getting ready

If Buckwalter could’ve reached his goals by himself, he probably would’ve done it, but he needed an influx of capital to go beyond Pennsylvania’s borders.

Alas says that the comprehensive overview of Punctual Pros included breakdowns of operational improvements the company was working on as well as growth opportunities for each of the three home services franchises. 

“We do a deep dive on all that so that people know what to expect,” Alas says. “You’re matching these puzzle pieces together.”

In Buckwalter’s case, the opportunity was marketed to about 80 firms, making it possible to cast a wide net and attract the right partner.

“We always try to do what we did with Matt, which is to start where he was and work backwards,” Alas says. “You ask, ‘What do you want? What does the ideal transaction look like? How much longer do you want to run this business? How much do you want to stay involved? What are the opportunities that you think you could you could go after with a private equity partner that you can’t do by yourself?’”

Answers to those questions shape the outreach and marketing process to make sure the client is getting what they’re looking for and goals align.

“Matt was one of the most sophisticated clients we’ve had and had done a lot of the preplanning,” Alas says. “He was very thoughtful about how he was building his business. That absolutely gave us a leg up in the process. It was probably smoother than other deals. Do I think that Matt got a better multiple because of who Matt is and what he did to prepare? I absolutely do.”

While some multi-unit franchisees prepare for years to get their business ready for a deal, others bump into someone at a conference, start talking, and set things in motion. Herrmann says CapitalSpring has worked deals with both types of owners.

He added that involving an investment bank can cause deals to take longer than a deal sparked by a conversation between an owner and his team. He says that investing in the business before a sale can increase value, but sometimes, the presale work can paper over issues that need to be addressed. 

“We take it all in stride,” he says. “We’re not afraid to roll up our sleeves and help build out the infrastructure of the business. That’s really what you’re talking about.”

The Final Word: Alignment

Private equity has money to invest. For a franchisee looking to take growth into the stratosphere, the right investors can jump-start the process. No matter how parties reach a deal, everyone involved needs to understand and communicate their goals. Alas says the goal isn’t to attract an investor; it’s to attract the right investor.

“It’s got to be comfortable,” he says. “Culture is a big part of it. You need to be aligned.”

Recapitalization

For franchisees who need an injection of capital to grow, private equity firms are ready and waiting as long as everyone’s goals align:

•  “We saw an opportunity to grow our business, and I felt like it was the right time to partner with Broad Sky Partners. I ran a process and then ended up with them and specifically around the desire to grow our footprint, to create opportunities for our management team, take some risk off the table, and more importantly, to continue to grow and fulfill a vision that I had.”—Matt Buckwalter, CEO of Punctual Pros 
•  “Alignment is important. If you’re a founder, you’re signing up to, typically, a five to seven-year partnership with standard private equity. You’re giving up control of your business, and it’s with someone you’ve never worked with before. Inherently, that can cause some issues down the line. I don’t think it means anyone has bad intentions, but there can be adverse consequences if you’re not aligned on the front end.”—Griffin Gordon, founding board member of Somersault Holdings (The Little Gym multi-unit franchisee) and founder/CEO of Taurus Capital Partners
•  “Most of the consolidation is coming from people who have done it for 30 years or 40 years. They want to punch out and retire, right? That’s a powerful force in franchising overall. As a firm, we exist to fuel that.”—Erik Herrmann, partner and head of the investment group at CapitalSpring
•  “We’ll put together marketing materials that can span anywhere from 50 to 75 slides about the growth opportunities, the financial profile, customer demographics, and business KPIs. It’s a very involved process.”—Brian Alas, managing director of Boxwood Partners, an investment bank.
•  “The beauty of franchising is it’s scalable, right? Firstly, the model is proven, and secondly, the model is scalable. It already works.”—Luke Andrus, CEO of Blue Star Investments (Anytime Fitness multi-unit franchisee)

Private Equity Meets Franchising: What to Know

Turning to private equity can offer significant advantages for franchisees seeking to accelerate growth, reduce their risk, and achieve ambitious expansion goals:

•  More capital, bigger moves. Private equity investment has accelerated growth, real estate acquisitions, and multi-brand portfolio expansion across the franchise world.
•  Holding periods matter. Investment groups often look at five to seven-year timelines, planning their exits as strategically as their entries.
•  Growth through partnerships. New capital allows franchisees to take on projects that once seemed out of reach—from development deals to multi-unit purchases.
•  Brand fit is everything. Investors favor scalable systems with clear ROI potential, strong unit economics, and built-in customer bases.
•  Culture vs. control. While capital can unlock growth, maintaining cultural alignment is crucial for investors and franchisees.