Exit Planning & Wealth Transfer Fundamentals

Ephor Newsletter Q4 2025

December 2025

As operating year 2025 concludes itself and we start thinking and planning for 2026 & beyond, many of you may be contemplating an EXIT from your business or at a minimum a partial wealth transfer of the value of your equity in years 2026 or 2027.

In this newsletter we will provide a current update on the availability of private capital in the near-term for an exit and wealth transfer initiatives; what is required to successfully prepare for and pass the Due Diligence (“DD”) process: and at a high level, the minimum business model attributes that institutional investors (Private Capital) are looking to underwrite in order to deploy the required capital to enable you to execute on a successful wealth transfer transaction.

Availability of Private Capital

As we exit 2025, a year in which in the Business Services Sector experienced only a slight increase in Enterprise Values (EVs), which is in the single digit range, coupled with a “flat” amount of Private Capital being deployed in our sector over the 2024 levels. This “slight & temporary pause” was driven mostly by the high degree of uncertainty both in the political and economic arenas. Clearly, all the disruption due to the “Change of Administration from the Biden Policies" to those of the Trump Administration, high inflation, the tariff disruption, instability in the Middle East, etc., has provided a protracted time of uncertainty.

However, especially by mid-year 2026 shapes up to be an optimum time frame for initiating exit and wealth transfer initiatives due to: USA domestic economic growth projected to be between 3% - 4.5% annually; the continuing lowering of interest rates especially in 1H 2026, lower tax rates, and most importantly; Private Capital is sitting on ~$1.1T dollars (yes a trillion dollars) of “Dry Powder” to invest.

Therefore, the supply of capital will outpace the demand for capital for “institutionally worthy business models & management teams” by nearly $8 dollars of capital available to every $1 dollar of “worthy” business models.

To put this in a perspective; over my 45+ years in the business world, this is only the 4th time I have seen an “Exit Opportunity” with this type of value & opportunity dynamics. Factually, I personally have exited 2 businesses during optimum periods like we are about to enter. As a result of this supply of capital imbalance in the near term, EVs will increase up to 30% over 2025 levels.

To be clear: Private Capital not only includes Private Equity (“PE”), but it also likewise includes family wealth offices, alternative asset funds, mezzanine funds, pooled funds, and state & federal government programs such as the SBIC’s etc. (some of the above are recent entries into the supply of capital pool).

Therefore, PE will experience more competition than ever before; as such we will enjoy a “very favorable sellers’ market” in the near term.

Preparing for & the Due Diligence Process: (“DD”)

The first step to attracting private capital at accretive EVs is to prepare the company and execute on the most important Due Diligence process. Private Capital and Investors in general have an expectation of ZERO surprises during this process. I often am asked to public speak on this subject, and as such, I often initiate my remarks by utilizing the following dialogue containing very relevant humor: So......

“A police officer pulled over a driver and informed him that, because he was wearing his seat belt, he had just become eligible for a $10,000 citizen safety award.

"So, what are you going to do with the prize money if you win?'' the officer asked. The driver responded, "I guess I'll go to driving school and get my license.”

At that moment, his wife, who was seated next to him, chimed in, "Officer, don't listen to him. He's a real smart ass when he's drunk."

This woke up the guy in the back seat, who, when he saw the cop, blurted out, ''I knew we wouldn't get far in this stolen car!"

At that moment, there was a knock from the trunk and a voice asked "Are we over the border yet?''

Well, obviously, the Driver (“the CEO of the car”) did not get the $10,000 of capital investment! This humorous analogy is oh so very true. Therefore, it is vitally important that Private Capital does not get surprised during the DD process.

Factually, only 25% of the letters of intent (“LOI’s”) issued by Private Capital (over the past 5 years) end up in a closed wealth transfer transaction. What is more insightful is that of the 75% of non-closed transactions, over 50% of those abandoned transactions are related to DD failures and or preclose surprises or undisclosed issues!

Likewise, it is factual that well prepared and well executed DD processes can result in an EV premium of up to 10%, likewise on the reverse; we have seen situations where EV discounts amount up to 15% have occurred due to poorly prepared "DD" information and process execution.

Below are two brief "DD" resources that should be of interest to you:

Furthermore, Institutional Investors generally will NOT enter into Exit and Wealth Transfer Initiatives and/or commence in the Due Diligence process unless your business model outputs include a majority of the following attributes:

High-Level Business Model Attributes Institutional Investors Must Have to Invest:

  • Systematic Performance Predictability - Companies with leading indicators, including financial and operational measurement and metric systems that actually forecast future results, not just report yesterday’s news.

  • Diversified Revenue Growth Processes & Assets – the company illustrates a “portfolio of new revenue sources”, such as non-direct sales-oriented alternative distribution venues, joint ventures, and strategic partnerships. Businesses where <35% of new revenue comes from direct sales efforts always command a higher EV.

  • Scalable Operating Models - Organizations that can grow efficiently without proportional cost increases in SG&A costs, combined with measurement and metric systems that illustrate consistent productivity improvement.

  • Low Risk-Optimized Structures - Companies with variable cost models and distributed customer concentration. Limited dependency on key executives and key large customers.

  • Leadership Capability & Capacity Beyond the Founders - Businesses with institutional-worthy and proven management systems, succession depth, and retention-based compensation structures.

  • The Takeaway for Investors to Invest: Enterprise value isn't created by individual improvements—the business process is built through scalable business processes, systematic & proven competitive advantages that compound over time.

  • What this means for CEO/Entrepreneur: The companies that attract institutional interest and premium valuations (“EV”) are not revenue growth centric or the largest in revenue growth: they're the ones that have built & consistently exhibit definable & scalable business processes that result in consistent performance that creates sustainable and recurring EBITDA performance.

In conclusion

Hopefully you enjoyed the slight "DD" humor contained in this newsletter!?

Ephor in October celebrated its 25th year of investing, advising, governing, and developing institutionally worthy service business models. Over those 25 years, some of the highlights of our work on your behalf have included:

  • 23 of our clients or investments have been recognized as “Fast Growth Companies” by noted publications as Inc. and Forbes Magazine etc.

  • Deployed ~$650m of Private Capital in 29 organizations that have returned ~$2.2b to shareholders, of which $750m was distributed to Founders and Individual shareholders, just like you.

  • Created ~12,500 jobs over the past 25 years, in the ~40 clients or investments.

  • Ephor has become the “go-to” organization for BPO investors to come to for sector performance benchmarking information and for setting EBITDA value multiples.

  • Ephor over our 25 years has completed 56 refinancings or wealth transfer transactions which have included 31 Private Capital providers, 15 Institutional Lenders, and 8 Mezzanine providers.

As such, we thank you for your patronage and all the input and learning you have provided us with over these many years. As always, we would love to hear from you and learn what keeps you awake at night, and how we can serve you better.

Finally, as a follow-up to this newsletter, in early January 2026, we will provide an additional informative newsletter on further wealth transfer & exit aspects, such as types of buyers and their target profiled sellers; plus, additional playbooks on maximizing Enterprise Values. Stay tuned...

From us at Ephor, we wish you and yours a joyous, love-filled and family-based Holiday Season!

Sincerely

Garry E. Meier

Strategic Practice Lead

Ephor Group, Inc.

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