Jim Osman

Sun, Jun 22, 2025, 3:19 PM6 min read

Private equity doesn’t chase headlines—it hunts in silence.

Armed with over $2.5 trillion in dry powder (Moonfare, May 2025), PE firms are scanning the market for overlooked opportunities. At the same time, a new wave of activist campaigns is hitting companies with soft margins, lazy capital allocation, or underperforming business lines. The market may not see it coming, but smart money already has. This process isn’t about guesswork. There are real signals that show when a company is moving from forgotten to target. I have spent three decades studying these patterns, and when three or more appear simultaneously, the playbook begins to take shape. If your company meets a few of these criteria, it might already be under consideration for a buyout. Here are the key factors to consider and the potential timeline for a buyout.

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• Consistent Cash Flow, Low Multiple

The first thing private equity looks for is simple: boring, dependable cash flow trading at a discount. If a company consistently generates EBITDA and trades at a multiple under 10x, it’s a target. Especially if that revenue is sticky, think of long-term contracts, essential services, or subscription-like models. The public market often overlooks these businesses. But the private market sees something different: a stable cash engine that can be leveraged, optimized, and rerated. Waste management, healthcare services, and packaging are textbook examples. These aren’t flashy names. They are often overlooked and underappreciated, despite their obvious presence. But for smart capital, that’s exactly the point. If the earnings are reliable and the valuation is low, the setup is already in motion.

• Underperforming vs. Peers

The next flag is underperformance. Underperformance is particularly concerning when compared to peers. Whether it’s lagging margins, poor return on invested capital, or a string of missed expectations, it signals operational slack. And activists love slack businesses. They don’t shy away from weakness; they see a value gap begging to be closed. Sometimes the whole business is dragging, but more often, it’s a conglomerate problem: strong segments buried under bloated cost structures or legacy units. That’s exactly what made (MMM) a target: a solid industrial core overshadowed by litigation and noise, ripe for a breakup. In this game, underperformance isn’t just a problem. It’s an opportunity for those ready to force the change the market has ignored.