Warren Buffet famously states in Berkshire’s annual report that all he needs is 5 minutes before giving a yes or no on whether he’s interested in pursuing a transaction.  Not to discredit Mr. Buffet, (whose patience and track record is another story), but his quick judgment is also shared by many private equity pros.

Most firms plainly state in simple terms the types of businesses that interest them, and it doesn’t take much effort, analysis (or discussion) to determine if there’s a match.

So does your business fit the general private equity acquisition profile for new platform investments?  Based on general observations perusing firm websites, and setting aside (but not discounting) size, sector, and valuation considerations, see below commonly shared business characteristics many private equity firms prefer;

1. “Strong management”

Not sure why firms typically specify “strong” when it comes to management.  Afterall, who wants (or would admit they want) “incompetent” business leadership.  Bottomline, (and whichever way you want to describe it), most private equity firms prefer management to come with the business.

2. “Low capital intensity”

Private equity firms don’t like to spend the profits, so if your business does, and does so significantly just to stay competitive (let alone grow), let’s just say this doesn’t help.

3. “Diverse customer base”

Customer concentration is a definite deal killer.

4.  “Growth potential”

Whether organic or through add-ons, some sort of growth is preferable.  Operating in a sizeable and growing industry is certainly part of the story.

5. “Profitable”

While some private equity firms look for turnarounds, most don’t.  The more consistent your company’s earnings, the better.

Other notables include;

“Recurring revenue”

Firms love predictability.  Similar to the note on consistent earnings above, if your revenue numbers make for easy Excel model creation, firms notice.

“Defensible market position”

Private equity firms are more interested in leaders versus followers, so if your company is consistently re-acting to competitor moves or outside market forces, this is something you’ll need to answer.

“Mission-critical product/service”

Given the current economic climate, this characteristic is probably more in demand now than ever.  Many private equity firms specifically seek out businesses that provide products or services that are vital to other companies.

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Please note that the above characteristics are just meant to serve as a guide.  If your business doesn’t fit the descriptions, this isn’t to say firms will quickly pass.  Bottom line is, most businesses won’t match all of the above and every transaction situation is different (eg. valuation/industry/size are major, not to be overlooked factors). However, if you want that 5 minute initial yes/no answer, matching all (or none) of the criteria above will certainly help.