For years, Tim Coop watched Tampa Bay entrepreneurs build companies, borrow money from his bank and run their operating accounts through it. Then private-equity firms began buying them at an increased pace, repaying the loans at closing and taking the banking relationships along with the businesses.
“I can remember five years ago discussing the high number of clients we had lost to sales to private equity,” said Mr. Coop, Hancock Whitney’s Tampa Bay regional president. “We had X million in loans out to them and their primary depository accounts, and private equity buys them and the loans get paid off. That’s been going on for years, but accelerated around 2021”
The lost clients were one sign of a larger change in who was buying Tampa Bay businesses. Private-equity firms, family offices and other investment sponsors were joining a market once dominated by strategic acquirers and family succession. “There’s more private equity in Tampa,” Mr. Coop said. “Tampa Bay itself has more family offices, more sponsors, as they call them, more funds that are acting like private equity than it used to.”
They are arriving as a generation of business owners approaches retirement. More than half of U.S. employer firms are owned by people 55 or older, including 28.2% owned by people between 55 and 64 and another 23.1% owned by people 65 or older. For founders who spent decades building companies that now hold much of their personal wealth, retirement raises a second question: what happens to the business?
Tampa Bay has no comparable breakdown of employers by owner age, but it has considerably more businesses than it did a decade ago. The Tampa-St. Petersburg-Clearwater metropolitan area counted 72,031 small employers with 554,060 workers in 2022, up from 56,753 employers 10 years earlier, while its population increased from 2.92 million in 2014 to 3.42 million in 2024. Mr. Coop expects many of the ownership decisions created by that growth to come due over roughly the next decade.
Some founders will have children prepared to take over. Others will find that the next generation wants a different career. “Do you want to go run your dad’s plumbing company?” said Brett Hickey, founder and chief executive of Star Mountain Capital, a private-equity firm that invests in lower-middle-market businesses. “Often the answer is no. People want to forge their own destiny, find their own path in life.”
Selling can allow a founder to transfer the wealth created by the company without requiring the next generation to operate it. Mr. Hickey described a hypothetical owner of a plumbing or HVAC business who sells for $100 million, diversifies most of the proceeds and gives his children capital to pursue businesses of their own.
“Instead of giving you the company, he sells it for $100 million,” Mr. Hickey said. “Now invest that money in a diversified portfolio. Give you $5 million to try out your business. Also invest in things that are diversified and defensive to be protected versus having all your family’s eggs in one basket.”
Without a sale, much of a family’s wealth can remain concentrated in one company and one industry. “There’s now enough data around that often the desired path for founders is to protect their children and grandchildren with a more diversified portfolio,” Mr. Hickey said.
Passing the company to children who do want it creates another problem. One sibling may have spent years inside the business while another built a career elsewhere, leaving the family to decide whether ownership should follow inheritance, contribution or some combination of both.
“How do you solve those equity issues?” Mr. Coop said. “It’s not always as easy as just, ‘Well, we still split the business,’ if one’s working in the business and the other isn’t.”
Many owners confront that decision after planning carefully for their homes, investments and other personal assets but not the company itself. Mr. Coop said at least half of business owners have a personal estate plan but no separate business-succession plan. “They’re not the same,” he said. “The vast majority of most business owners’ personal wealth is tied up in their business.”
The succession plan has to settle more than valuation. Owners may want to provide for children, protect longtime employees, make charitable gifts, preserve a community legacy or maximize after-tax proceeds, with each priority potentially favoring a different buyer or transaction.
“I don’t think anybody has one priority,” Mr. Coop said. “Usually you have three or four and you weight them. Perhaps family’s the most important. Or maybe legacy in the community is the most important, but oftentimes money is the most important thing to people.”
Sorting through those priorities can bring several advisers into the same deal. A lawyer handles legal documents, a CPA works through taxes, a banker understands the company’s financing, a wealth adviser plans for the proceeds and an M&A adviser runs the transaction. “Some people come together with a great attorney, a great CPA, a banker, a wealth adviser, maybe even an M&A adviser,” Mr. Coop said. “What they may not have is somebody looking at the big holistic picture to make sure it all works together.”
Preparing to Be Sold
Choosing private equity still leaves the founder with choices about how much to sell. An owner can exit completely, sell control while keeping a minority stake or roll part of the equity into the recapitalized company. Private-equity firms generally want control, Mr. Coop said, but retained ownership lets a founder participate financially if the company grows and is sold again.
How valuable the business is depends on what a buyer finds inside the company. A business producing $20 million in annual sales can look considerably less attractive if too much of the revenue comes from one customer.
“Sometimes that means passing up the opportunity to do more sales with that one heavy customer and diversifying and putting your sales efforts elsewhere,” Mr. Coop said. “So it’s not easily done, but it’s doable.”
The same dependence can reside in the owner. Customer relationships, major decisions and years of operating knowledge may all run through one person, making the founder indispensable while the company is private and reducing its value when a buyer has to operate without that person.
“A lot of businesses are tied up in their owner, and if that owner steps away, the value of the business goes away,” Mr. Coop said. “Making yourself dispensable is key. And that is not always easy.”
Reducing that dependence can mean hiring managers, transferring customer relationships and formalizing processes that previously existed in the founder’s head. The company’s financial records have to make a similar transition, from systems built for an owner who already understands the business to reporting that can withstand questions from employees, strategic buyers or investment firms encountering it for the first time.
Neither problem is easily remedied once a sale process has begun. Customer concentration, management gaps and weak internal controls can take years to address. “The value of the business can deteriorate if you don’t take steps to preserve it and increase it,” Mr. Coop said. “I think a lot of people find themselves not starting early enough.”
Delay can eventually surrender the timetable altogether. Health, age or family problems can force a transaction before the owner has prepared the company or decided which outcome is preferable. “You have a plan for each eventuality,” Mr. Coop said. “It’s really just the idea of planning for multiple options and not being tied into one outcome.”
What the Buyers See
Once a company reaches the market, the operations an owner spent years making more sustainable become part of an investor’s comparison. Star Mountain examines businesses in industries ranging from plumbing and HVAC to roadside repair, natural-gas infrastructure and fiber installation.
“Sometimes investing is about what we don’t invest in as much as what we do,” Mr. Hickey said. “Understanding industry trends, understanding what good operations of a company look like, to make sure that you can look at 20 companies and say, ‘Wow, this one’s got great operations.’”
Management is part of the comparison. Mr. Hickey likens the process to judging sports organizations that may have similar talent but produce different results because of their training, leadership and culture. “You look at different sports teams and say, ‘Wow, this sports team had a great training facility, great training program, culture, head in the game, they’re driven. These guys are going to be winners,’” he said. “That’s part of being a private-equity investor, is really understanding what that looks like.”
Star Mountain’s published criteria begin with companies generating at least $15 million in revenue, while its current underwriting positions describe businesses with roughly $5 million to $50 million in earnings before interest, taxes, depreciation and amortization. The firm can provide debt, equity or both and says it can invest $10 million to $150 million in a company over the life of an investment, including capital for later acquisitions and financings.
Mr. Hickey said Star Mountain has also spent millions of dollars developing custom technology to assess companies and work with them after an investment. That gives founders another basis for comparing bidders besides price: what the buyer can do with the company once it owns it.
“You want to bring somebody in that’s going to add value in the sector, in the industry,” Mr. Coop said. “It ought to be somebody that is going to be able to tell you things you didn’t know about how to grow the business and bring resources and synergies to the table.”
That expertise can matter when a founder has taken the company as far as a personally run organization can go. Deeper management, new systems or acquisitions may be needed for another stage of growth. “It’s not just giving money,” Mr. Hickey said. “You really need to know the playbook, to use a sports analogy. You got to know the playbook that you’re going to run and have experience running the plays. That just takes years to get good at.”
The same smaller companies can look different from the investments already filling an institution’s public-market portfolio. Stocks may be heavily weighted toward technology and software, while profitable plumbing, HVAC, infrastructure and other essential-service businesses can behave differently through economic cycles. Mr. Hickey describes that lower correlation as part of their appeal to investors seeking diversification, and senior members of Star Mountain’s investment team also invest personal money alongside outside capital.
Qualified small-business-stock provisions can add a tax advantage for eligible investments. “There’s also the tax advantages under the new tax regime with the qualified small business stock,” Mr. Hickey said. “Investors can get to ten times their money, potentially tax free.”
Those incentives overlap with the same lower end of the market where founder retirements are putting companies up for sale. “The aging demographic doesn’t impact a company that’s already owned by a private-equity firm,” Mr. Hickey said.
Buying the Next One
Once a family business has been acquired, it can become the buyer of another. The HVAC industry, for example, remains fragmented among local and regional operators, allowing a contractor to grow customer by customer or acquire another company and obtain its employees, accounts and territory in a single transaction.
“It’s a fragmented industry, right?” Mr. Coop said. “The HVAC business, that’s part of what makes it so attractive. And then there’s the ability to bundle these home-services products together where you have one person you call for your AC, for your plumbing, for your roof, etc
One HVAC acquisition can become a platform for the next contractor, then plumbing, roofing or another geography. But earlier consolidation waves give Mr. Coop reason to doubt that scale alone will eliminate independent operators.
He remembers when AutoNation and other national consolidators expanded through the automobile business and bankers predicted the end of family-owned dealerships. “Here we are 25 years later, and there may not be as many of them, but they’re still mom-and-pop auto dealers,” Mr. Coop said.
The survivors show that consolidation can shrink the independent field without erasing it, particularly in businesses where local relationships and specialized knowledge retain value. Private equity’s own timetable has proved less uniform as well: some firms are holding companies beyond the five-to-seven-year periods traditionally associated with the industry when high purchase prices make the returns expected from a quick resale harder to achieve.
Founders make a timing bet before the transaction ever reaches that stage. Mr. Coop has watched owners receive offers worth more than they ever expected their companies to command, reject them in hopes of receiving more and eventually sell for less.
In one case, the deciding issue was not price. A business owner received a large offer and turned it down because he feared longtime employees would lose their jobs. The company eventually sold for considerably less.
“Most people don’t make that decision, but this particular business owner did,” Mr. Coop said. “I do think you have to be satisfied in your retirement with the decisions you made in terms of how you transition your business.”
Mr. Coop isn’t certain what ultimately happened to the workers. The owner’s decision nevertheless reflects a suspicion that some founders carry into private-equity negotiations: that the buyer will monetize the company at the expense of what they spent years building around it.
“There are certainly quite a few business owners out there that have some disdain about the idea of selling to private equity and to somebody that’s just monetizing the business,” Mr. Coop said.
That makes the buyer itself part of the due diligence. Mr. Coop tells sellers to examine the principals, the firm’s track record and what happened to other companies after they entered its portfolio. “You have to get to know the principals,” he said. “You have to look at their track record, look at the other companies in their stable, assess their values and operating philosophies There are differences out there.”
At larger banks, he has watched founders reverse the process on bidders. Private-equity firms arrived expecting to question the company and found owners asking about the fund’s leadership, industry experience, portfolio companies and values. Price remained part of the interview, but so did the people, culture and reputation the owner would leave behind.
“If you’re one of these people that just says, ‘I don’t give a damn about these people or this business, I just want half a billion dollars,’ then maybe that’s not one of your considerations,” Mr. Coop said. For owners who do care, those considerations can survive until the offer becomes difficult to refuse. “There are people that find it distasteful,” he said, “but then the money is so overwhelming, it’s hard to resist.”
Mr. Hickey distinguishes the smaller companies Star Mountain pursues from the large transactions that shaped much of private equity’s public reputation. Combining two large organizations can create savings by eliminating overlapping operations and jobs, while Star Mountain says its model is to invest in profitable smaller companies and grow them.
“If you’re one of the people or one of your family members that lost a job, you’re probably not a huge fan,” Mr. Hickey said. “Building and growing companies, so we’re creating jobs.”
A Tampa Market for Buyers
A company can grow under new ownership while Tampa Bay loses control over where that growth occurs. An outside owner can move future decisions about hiring, investment and expansion to another market. “If a company is being bought by an outside party, and jobs are lost and that economic impact locally is diminished, that’s a risk,” Mr. Coop said.
That forces the region to keep producing and recruiting companies while some of the businesses already built here are sold, relocated or wound down. Tampa Bay has done the first part rapidly: its 72,031 small employers in 2022 represented nearly 15,300 more than a decade earlier.
“Businesses crop up all the time that are growing up underneath your feet that you didn’t know were here,” Mr. Coop said. The roughly half-million residents Tampa Bay added between 2014 and 2024 gave those companies more customers and workers, while making the region more visible to investors searching for growing markets and fragmented service industries.
Star Mountain became one of those investors and one of the firms expanding alongside them. It has about 150 full-time employees plus roughly 40 operating partners and senior advisers, with people in 20 cities and investments across more than 100 businesses on its platform. Its Tampa office started with a few employees and has grown to nearly 60.
That growth exposed a shortage the region’s population boom could not quickly fix. Private equity depends on people who know how to find businesses, distinguish strong operations from weak ones, evaluate management and work with companies after an investment. Mr. Hickey calls it “an apprenticeship business.” “We knew that there weren’t a lot of existing people to hire in Tampa,” he said. “We knew we had to build talent.”
New York spent generations producing finance professionals who trained under earlier generations, while South Florida attracted experienced workers from the Northeast who arrived with careers at large financial institutions. Tampa had produced more companies and more economic activity without yet accumulating the same depth of private-equity experience.
Mr. Hickey compares that development with water polo in California, where strong programs produced coaches as well as players and allowed each generation to train the next. “California has radically stronger water polo than Florida,” he said. “And you ask yourself, why? Well, there’s just been water polo there for so long that there are coaches that train, motivate, educate and inspire, and that has created that program.”
New York developed finance the same way. “New York really was the main hub of finance,” Mr. Hickey said.
Star Mountain began building that apprenticeship locally. About 30 interns, mostly from Florida schools, now train with the firm throughout the year, more than 125 have passed through the program and roughly half of its junior team began as interns.
The firm began working with University of South Florida students in 2021. By early 2024, more than a dozen members of the university’s Investment Club had trained with Star Mountain, and several former interns had moved into full-time analyst roles.
The earliest classes were small enough for experienced employees to teach around their regular jobs. As interns became analysts and another class arrived behind them, the training operation itself had to become more formal, eventually requiring a human-resources employee assigned to it full time.
“Whereas before, we were all kind of helping out around the edges, now it’s a true dedicated scaled program,” Mr. Hickey said. “And so we can train people better. They get to collaborate better, they get a much more professional experience.”
Now the program is requiring real estate. Star Mountain has committed to an additional 22,000 square feet in downtown Tampa that Mr. Hickey said is being custom-built around training, development, integration and collaboration.
The firm came to Tampa knowing it could not hire enough experienced private-equity professionals for the operation it wanted to build. Its office now has nearly 60 employees, including people trained through the system it created to fill that gap. “Now we have a critical mass,” Mr. Hickey said.