Every private equity firm says it wants proprietary deals. Fewer have a process that produces them. In the lower middle market, where most targets are founder-owned and many owners have never spoken with a financial buyer, the gap between firms that source well and firms that wait for banker books is wider than anywhere else.

This guide is for partners and principals at lower middle market private equity firms who want a repeatable process for off-market business acquisitions. It covers what “off-market” actually means, how to build a target universe, how to write outreach founders answer, and how to measure whether your private equity sourcing is working. It also explains how we approach this work at Triwell Partners, and why we think the details matter more than the volume.

Why proprietary deal flow matters

In a broad auction, the seller’s advisor is paid to create competitive tension. Buyers compete on price and speed, diligence windows shrink, and the winner is often the firm willing to stretch furthest. That is a fair outcome for the seller. For the buyer, it usually means paying a full price for a business everyone else also saw.

Proprietary deal flow changes the starting point. When you reach a founder before a formal process begins, there is time to understand the business, earn the owner’s trust, and structure a transaction around what the founder actually cares about. Price still matters. It is just no longer the only thing that does.

Firms already source a large share of their own deals

The most widely cited data on where private equity deals come from is a survey of 79 PE investors by Paul Gompers, Steven Kaplan, and Vladimir Mukharlyamov, published through the National Bureau of Economic Research. Respondents said about 36% of their closed deals were self-generated, roughly the same share that came from investment banks. On average, they considered close to half of their closed deals proprietary in some way, and the authors found that smaller and younger firms tend to source more proprietary deals (Buyouts Insider).

And they pass on most of what they see

The same survey shows how selective the process is. For every 100 opportunities a firm considers, it investigates fewer than 24 in depth and closes about six (Buyouts Insider). That is the real argument for a sourcing engine: if most of what reaches you will not fit, the only lever is seeing more of the right businesses, earlier.

Smaller deals trade at lower multiples

The lower middle market also starts from a different price point. GF Data, which collects confidential transaction data from hundreds of PE firms, shows average purchase multiples rising steadily with deal size over the long run. Below $10 million of enterprise value, deals in the first half of 2025 averaged roughly 5.5x to 5.6x EBITDA (GF Data). Size is not the only driver, and sector and quality matter too. But the pattern is consistent, and it is a large part of why sponsors focus here.

What off-market business acquisitions actually look like

“Proprietary” is one of the most overused words in private equity marketing. Even the survey above notes that respondents’ definitions vary. It helps to be honest about what counts.

Truly proprietary

The owner is speaking only with you. There is no process and no competing buyer. These deals come from direct outreach or long relationships, and they are the rarest.

Limited or negotiated process

The owner is speaking with a small number of buyers, often with an advisor or accountant involved. You are in the room because of a relationship or because you reached the owner early. There is competition, but on far better terms than an auction.

Broad auction

A banker sends a teaser to a long buyer list, collects indications of interest, and narrows the field. Most firms know this market well.

A proprietary sourcing program does not eliminate the third category. It shifts the mix toward the first two, and makes sure owners know who you are well before the third ever starts.

Why founder-owned businesses are the core opportunity

Founder-owned businesses are the center of the lower middle market, and a large share of them will change hands soon. In the Exit Planning Institute’s 2023 national survey, 73% of owners of privately held companies said they want to transition within the next ten years, a shift the Institute values at about $14 trillion (Exit Planning Institute).

Wanting to transition is not the same as being ready to sell, and it is certainly not the same as wanting a call from a buyer. How founders think should shape how you approach them:

Legacy matters. Founders want to know what happens to the name, the culture, and the customers they spent years serving.

Employees matter. Many owners feel personally responsible for long-tenured staff.

Timing is personal. Health, family, succession, and fatigue drive timing more often than market conditions.

They are approached constantly. Owners of good businesses get a steady stream of unsolicited buyer emails, and most of them read the same. That makes them skeptical, and reasonably so.

The firms that win founder-owned deals are usually the ones that showed up early, said something true and specific, and stayed consistent.

Step 1: Define a sharp sourcing thesis

Outreach without a thesis turns into volume for its own sake. Before building any list, write down what you are looking for and why your firm is the right owner.

Sector and sub-sector. Not “industrial services,” but the specific niches where you have conviction and operating insight.

Size. The range that fits your fund and your platform or add-on strategy.

Geography. Where you can realistically support the business.

Ownership profile. Founder-owned, family-owned, second generation, no institutional capital.

Your “why us.” The specific reason a founder in this niche would choose you over another buyer.

The “why us” is the part most firms skip, and it is the part that makes outreach credible. If you cannot say in two sentences why a particular owner should take the call, the owner will not take it.

Step 2: Build and verify the target universe

With a thesis in hand, the work becomes turning it into a defined list of companies and owners. This is where most of the effort in private equity sourcing actually goes.

Start broad, then filter

Company databases, industry association directories, trade show exhibitor lists, state licensing records, and local business journals are all useful starting points. Each is incomplete on its own. Combined, they give a much clearer picture of a niche.

Confirm ownership

Many companies that look independent are already sponsor-backed or owned by a strategic. Approaching a portfolio company as if it were founder-owned tells everyone involved that the homework was not done.

Find the right person

In a founder-owned business, the decision maker is usually the founder or the controlling family member, not a general manager.

Clear every name before anyone writes

Check each contact against your CRM and recent email history. Founders talk to each other and remember who contacted them. Two people from the same firm writing to the same owner is one of the fastest ways to lose credibility.

Look for signals, but do not invent them

A founder nearing retirement, no obvious successor, or a recent leadership change can all suggest an owner is more open to a conversation. They help you prioritize. They do not tell you what the owner wants, and outreach should never pretend they do.

Step 3: Write outreach founders actually answer

Most buyer outreach fails toward enthusiasm. It opens with praise, describes the fund, and asks whether the owner is “open to exploring strategic options.” Owners have read that email many times. It sorts the sender into the pile.

Observation before intention. Lead with something specific and true you noticed about the business: a location, a capability, a hire, a market it serves. The observation earns the ask.

Facts instead of adjectives. “Thirty-one years in a category that has consolidated this hard is not common” says more than “your impressive growth.”

Short. A few sentences and a plain question. Not a pitch.

A conversation, not a transaction. The goal of the first message is a call.

Conditional, never presumptuous. “If the timing ever makes sense” rather than “when you decide to sell.”

Use a multi-touch cadence

One email rarely gets a response. A short sequence over a few weeks, where each touch adds something new instead of “bumping” the last, gives an owner several chances to engage without becoming a nuisance.

Be accurate

One wrong fact in an opening email tells the owner you did not look. If a detail cannot be confirmed, leave it out.

Step 4: Nurture relationships over long timelines

Most owners will not be ready when you first reach them. “Not now” is not “no.” Many of the best off-market business acquisitions close years after the first conversation.

Log every interaction. Notes on the owner’s goals, family situation, timing, and concerns are what make the next conversation better than the first.

Set follow-up by owner. “Maybe in five years” and “call me after our busy season” call for different cadences.

Stay useful. Market observations, introductions, and perspective are remembered long after a pitch is forgotten.

Watch for trigger events. A health issue, a partner leaving, a major customer change, or a succession conversation can move an owner from “someday” to “now” quickly.

When the owner finally decides to explore a sale, the goal is to be the first call, not one of twenty names on a banker’s list.

Step 5: Decide who does the reaching out

Building an in-house sourcing team is one path. Many lower middle market firms combine their own efforts with outside help: local accountants, attorneys, and wealth managers who hear about an owner’s plans early, and buy-side advisors who run targeted origination in a defined niche.

There is a practical reason the second option works. A founder often responds differently to an advisor than to a fund. A note from a buyer reads as an offer. A note from someone who spends time with the buyers in a category, and with the owners they ask about, reads as a conversation. That small difference changes who picks up the phone.

How Triwell approaches proprietary sourcing

Triwell Partners is an M&A advisory team. We do not buy, own, or invest in companies. We work on behalf of active buyers, including private equity firms, family offices, and independent sponsors, and we spend our time with the owners those buyers want to meet.

The owner never pays us

Our compensation comes from the buy side. There is no retainer and nothing is ever invoiced to the owner, our fee structure is disclosed in writing before anything begins, and an owner can end the conversation at any point without cost or obligation. That leaves one question in front of the owner: whether this buyer is right for the business and the people in it.

We do the research before we write

Every claim we make about a business traces to something we can point to: the company’s own website, a public filing, a news report, a license record. If we cannot source a detail, it does not go in the email. The same standard applies on the buyer side. When we map who would buy a business, we rank buyers on transactions they have actually disclosed, not on who “probably” buys in a category.

We lead with what we noticed, not what we want

Our outreach opens with an observation about the owner’s business and stays plain. No flattery, no “unlock value,” no generic praise. Owners are flattered by every buyer who writes to them. Showing that we actually looked is what makes them feel singled out.

We keep the first conversation small

We do not discuss valuation, multiples, or fees in cold outreach, and we do not send calendar links. When an owner does take the call, it covers four things:

Their objectives and timing. Whether a transaction is a five-year question or a live one.

The business as it stands. Revenue range, team size, customer mix, and how much of the business depends on the owner.

The buyer and their interest. Who they are, what they already own, and why this business fits.

What happens next. No financial statements, no LOI, and no commitment come out of that call.

One confidential path, led by partners

Our process has three steps: an initial consultation to understand the owner’s objectives and timeline, buyer matching with confidential outreach and qualified interest, and closing support through diligence and transition. Three partners lead every mandate, and an owner’s name is never shared with anyone outside the process without their written consent.

We are clear about whose side we are on

When we are working on behalf of a buyer, we do not offer to represent the owner, and we never run both sides of one transaction. We do not claim to represent anyone without a signed engagement, and we do not name a buyer in outreach unless that buyer has agreed to be named.

We do not manufacture scarcity, and we coordinate

You will not see “exclusive opportunity” or “we rarely reach out” in our emails. If our list is narrow, it is because the buyer’s criteria are narrow. Before any outreach, we check every contact against our CRM and past conversations, and we track which buyers we have approached across engagements, so no owner or buyer hears from us twice.

If a sale is not the conversation

Most owners we speak with are not selling this year, and our relationship does not depend on that. Through our business advisory services, we offer fractional CFO support, accounting management, and bookkeeping infrastructure: month-end close, reporting, and controls built to hold up in diligence. They stand on their own, and they are also what makes a business more valuable when the timing does arrive.

Measuring your deal sourcing program

A simple funnel shows where the process is working and where it is leaking:

Coverage. What share of your target universe have you actually contacted?

Response rate. What share of contacted owners replied in any form?

First meetings. How many replies became a real conversation with the owner?

Active relationships. How many owners are you in ongoing contact with?

IOIs and LOIs. How many conversations progressed to a formal indication or letter of intent?

Proprietary share of closed deals. Of the deals you closed, how many came from your own sourcing? Use a strict definition, since survey data shows firms define “proprietary” loosely.

Track these over quarters, not weeks. Proprietary sourcing is a long-cycle activity, and early numbers usually understate where it ends up.

Common mistakes in private equity sourcing

Volume without a thesis. Thousands of generic emails produce noise, not deals.

Leading with the fund. Owners care about their business, not your AUM.

Flattery instead of facts. Praise without a specific behind it reads as a template.

Talking valuation too early. Numbers in a first conversation anchor expectations and close doors.

Presumptuous language. “Your exit” and “when you sell” assume a decision the owner has not made.

Uncoordinated outreach. Multiple people from one firm contacting the same owner signals disorganization.

Giving up after “not now.” The follow-up is where most proprietary deals are won.

Building a durable engine for off-market business acquisitions

Proprietary deal sourcing is not a campaign. It is a system: a sharp thesis, a verified universe of founder-owned businesses, outreach that is specific and respectful, and the patience to stay in touch until the timing is right. Firms that build it end up in more conversations, earlier, and on better terms than firms that rely only on the intermediated market.

For lower middle market private equity firms, that means more off-market business acquisitions, deeper relationships with founders, and a pipeline that does not depend on the next banker book.

Triwell Partners works on behalf of private equity firms, family offices, and independent sponsors to find and reach founder-owned businesses before they enter a sale process. If you are building or expanding a proprietary deal flow program, we would be glad to talk.

Sources

Gompers, Kaplan and Mukharlyamov, “What Do Private Equity Firms Say They Do?”, NBER Working Paper 21133.

Buyouts Insider, “Buyout firms target 27 percent gross IRR on deals: study”.

GF Data, Middle-Market M&A ESOP Advisor Special Report, Q3 2025.

GF Data, “Small-Deal Resilience: Why the Under $25 Million Tier Still Moves in H1 2025”.

Exit Planning Institute, 2023 National State of Owner Readiness Report summary.

Triwell Partners firm figures, October 2026.