LenderHawk analysis. Not affiliated with or endorsed by The Permanent Podcast.
Permanent Equity’s Emily Holdman and Tim Hanson break down why 2023 looked very different from the frothy 2021 market for business sales. They focus on valuation normalization, higher interest rates, lender pullback, and why structure, not just headline price, determines whether a sale actually serves the seller’s long-term goals.
Business owners thinking about a sale, ETA investors, and operators who want to understand why 2023 deal terms looked tougher than the 2021 peak.
2021 functioned as a valuation distortion because many businesses were priced off a few months of pandemic-era performance rather than a full operating history.
A seller who waits for a return to 2021 multiples is betting against time, taxes, health, and market conditions that may never line up again.
Higher risk-free rates force buyers to demand lower purchase multiples because illiquid small-business equity must clear a much higher return hurdle than government debt.
Bank pullback in late 2023 killed deals that depended on debt, and many buyers were unwilling or unable to replace lost leverage with more equity.
The highest headline price can create the worst post-close outcome if it comes with heavy debt, layoffs, covenant pressure, or misaligned growth expectations.
Structure matters as much as price because sellers can choose between more cash now and more money later tied to performance.
Permanent Equity’s pitch is different from leveraged buyers because it uses its own capital, so its underwriting is not forced to reprice every time bank rates move.
A seller’s best alternative may simply be to keep the business, keep the cash flow, and build a multigenerational enterprise if that option is realistic.
A seller should optimize for the full quality of the transition, not just the highest number on day one. The right decision includes taxes, successor quality, employee impact, time use, and post-close optionality.
When to use: Use this when evaluating whether to sell now, wait, or pursue a structured transaction.
The health of a company depends less on its sector label than on the mechanics of its business model: pricing power, payment timing, inventory burden, and customer dependence.
When to use: Use this when explaining why two businesses in the same industry can face very different valuation and risk profiles.
Emily Holdman reviews roughly 1,000 to 2,000 companies per year and has done so for 15 years.
Used to frame her view of market cycles and seller behavior.
In 2021 some businesses were being sold on only three months of trailing performance and three months of forward expectations.
Presented as evidence that 2021 was a distortion rather than a normal market.
Interest rates moved enough that a risk-free government return around 5% made buyers demand roughly 15% to 20% on small-business equity.
Tim used this to explain why purchase multiples compressed as rates rose.
Some late-2023 deals fell apart because banks refused to fund the debt that buyers had assumed would be available.
Emily described the quarter as especially difficult for leveraged transactions.
Mezzanine financing in those broken deals could carry roughly 14% to 17% interest rates.
Used to illustrate why replacing lost bank debt can destroy transaction economics.
Permanent Equity said its offers did not change in 2021 because it does not use leverage.
Emphasized as a contrast with buyers who had to reprice deals as debt costs moved.
A risk-weighted appraisal tool on Permanent Equity’s site can show a business value range such as $20 million on the low end and $35 million to $40 million on the high end.
Used to explain how earnings quality, volatility, and complexity change valuation ranges.
Many business sale processes take two to three years from first preparation to closing.
Used to argue that waiting for a perfect market can waste valuable time.
Start thinking about a sale years before you actually want to close, because the process often takes two to three years.
Why: The market can change materially while you are getting books cleaned up, advisors engaged, and buyers lined up.
Evaluate a sale in the context of taxes, health, succession, and your next chapter rather than chasing the highest multiple alone.
Why: The best headline price can still be a bad outcome if life circumstances or post-close economics turn against you.
Disclose skeletons early if you want a credible valuation.
Why: Hidden liabilities such as leasebacks, IP sales, or lawsuits will reduce price later and make negotiations more contentious.
Use structure to share risk when future performance is uncertain.
Why: You can take more money later instead of forcing all value into cash at closing.
Ask what the buyer’s capital stack looks like before accepting the price.
Why: Debt-heavy structures can lead to layoffs, covenant pressure, and a higher chance the deal breaks before close.
Treat confidentiality as a staged process rather than an all-or-nothing reveal.
Why: You can begin with high-level conversation, then move into NDA-backed diligence once both sides are serious.
The company had been outcompeted for years, but 2021 supply shortages left Home Depot and Lowe’s out of lumber, allowing the decking business to sell through old inventory and post a record year. The owners wanted to monetize that peak, but the episode treats it as a classic point-in-time windfall that should not be capitalized into a permanent valuation.
Lesson: Temporary supply shocks can create a fake earnings run-rate that investors should not pay for.
Emily describes sellers who were acquired at high valuations because they fit into a larger roll-up thesis, only to see the buyer’s priorities shift when conditions normalized. In those cases, leadership teams were often replaced and operating priorities changed quickly after close.
Lesson: A high price tied to synergy can come with real post-close control risk for the seller and the employees.
The sellers allegedly said the house had never flooded even though it had flooded multiple times, and the buyers later had contractual recourse after discovering the truth. The anecdote is used to show that hidden liabilities may not stay hidden through diligence or after closing.
Lesson: Disclosure beats concealment because undisclosed problems tend to surface and become more expensive later.