In our continuing special series on the value of private equity sponsors, we turn our attention to what motivates a family-run, privately-held, or even public company to sell to a private equity firm.

On the face of it, it would seem challenging to convince businesses owned by families for decades to give up control to an outside group. And private equity as an industry has not always had the best public relations. Yet the reality is quite different. For many reasons, sellers have looked increasingly to private equity to solve a variety of issues.

The most obvious is generational wealth transfer. There’s a huge wave of baby boomer founders of small to medium-size companies who are heading to retirement. One study reported almost one-quarter of all entrepreneurs are over age 55. These patriarchs/matriarchs don’t always have younger relatives interested in taking the reins of the family business.

There’s also the problem of multiple generations with varied interests. We’ve seen many situations where one family member wants to keep the company, while the rest want to take monetize their share and pursue other interests. The remaining relative may not have the liquidity to buy out the rest of the family.