They call you a control freak … as if that’s a bad thing. But through calling the shots—plus a lot of blood, sweat and tears—you built a $100+ million business. And now you’re ready to grow it to the next level.
You don’t need a new boss to make that happen. You just need new capital.
Too often though, owners of profitable, growing middle market companies assume there are just two ways to bring in outside capital: lever up with more debt—which may not be available or desirable—or hand control over to a private equity firm. For decades, that assumption was largely correct. But a quiet shift has been building in private equity that gives owners a third option they may never have heard of: non-control equity.
Minority-stake, non-control PE investing has expanded sharply over the past several years. From 2023 to 2024, US minority equity transaction value increased approximately 53% and again grew precipitously in 2025. 1 PitchBook touts the shift on its website: “private equity growth deals are outpacing traditional leveraged buyouts, as buyout firms increasingly embrace minority stakes amid historically high borrowing costs.” 2 Dry powder earmarked for growth-equity — the PE strategy built around non-control investing — is estimated at roughly $310 billion in the US alone. 3
Despite the meteoric growth, awareness among business owners has not kept pace. Historically, the preponderance of private equity investments in middle market companies were buyouts or control deals, which is likely why most founders still equate private equity with giving up control of the company they built. As that belief becomes increasingly out of date, understanding the alternative could open a financing option that fits your goals far better than an outright sale or a loan.
What Is a Non-Control Equity Investment?
A non-control equity investment is a transaction in which an investor — typically a private equity firm or family office — acquires equity in a privately-held company without taking control of it. These ownership stakes generally fall between 25% and 49% of the business. The founders and their management team continue running the company. The investor becomes a financial partner and, often, a source of strategic assistance, but not your new boss. The investor's return comes from the company's growth in value, not from running the business themselves or rolling it up with another portfolio company.
That’s different than a traditional buyout, where a PE firm acquires a majority or entire stake, imposes its own governance and financial controls, and frequently makes leadership changes.
Why Non-Control Equity Deals Are Becoming More Common
It's worth understanding why this shift is happening now, because the “why” informs how the deals get structured and who is offering them.
The market for control investments in the middle market has become picked over. Thousands of private equity firms compete for a limited number of quality buyout targets, and the majority of those deals get done through formal auction processes managed by investment banks that may solicit interest from hundreds of potential investors. The competition has driven up deal multiples and made it harder for PE firms to find attractive opportunities through the traditional buyout route.
As a result, an increasing number of PE firms have turned toward non-control investments, to deploy capital into good companies with a growth orientation, without battling with their peers in an auction. The upshot: more firms than ever are actively looking to write checks for a minority-stake in companies like yours.
Why Might a Non-Control Equity Raise Make Sense for Your Business?
There are several common reasons owners pursue non-control equity:
• Growth capital. If you need capital to fund internal growth initiatives, capital expenditures, or acquisitions, a non-control raise can provide it without forcing a full sale of, or giving up a controlling interest in, the company or loading the balance sheet with additional debt. Companies that are positioned to grow but need capital to make it happen—or to make it happen more quickly--are at the top of most private equity investors’ lists for non-control equity investment.
• Shareholder liquidity. Many owners have the bulk of their net worth tied up in a business they've spent decades building, with no easy way to access that value without selling outright. A non-control investment can provide meaningful liquidity for estate planning purposes, or simply to diversify personal wealth outside the company.
• Buying out minority shareholders. If your company has minority shareholders — family members, early investors, or former partners — who want out, this type of capital can finance that buyout.
• De-leveraging. If your business carries meaningful existing debt, non-control equity capital can be used to pay it down. In some cases, this can also allow you to release personal guarantees you may have signed to secure earlier loans.
The end game for companies seeking non-control equity capital is similar to that of most private companies: sell to a financial sponsor or strategic buyer in 5-10 years. An infusion of fresh capital into the capable hands of the founder today--when they still have strategic ideas and plenty of gas in the tank—just means the ultimate exit is likely to be more remunerative.
What You Give Up, and What You Get in Return
It's fair to ask what an institutional investor gets out of a deal where they don't control the company. In exchange for giving up some downside protection (compared to a control position), these investors typically negotiate structured terms — often through preferred securities like convertible preferred or participating preferred stock — that provide them some cushion if things don't go as planned, along with a defined path to eventually exit the investment.
In addition to liquidation preferences that may give them priority in a sale or liquidation, they usually seek some degree of operational involvement — a seat on the board, regular reporting, input on major strategic decisions.
In return, a non-control investor can bring real value beyond the capital itself: helping with expansion into new markets, identifying and helping execute accretive or strategic acquisitions, professionalizing sales and marketing, opening doors to new customers through their network, and helping integrate AI or other newer technologies that improve margins.
For an owner who has taken the business as far as they can with existing resources and relationships, an institutional partner's network and expertise can matter as much as the check itself.
What Kind of Companies Are a Fit?
Non-control equity investing is generally suited to established, profitable middle market companies rather than early-stage startups. Firms specializing in this type of financing typically work with businesses with pre-money enterprise values in the $100 million to $500 million range, that want to raise anywhere from $30–40 million on the smaller end up to a "sweet spot" of $50–150 million.
Most PE firms have historically made control investments and thus focus on certain specific industry verticals where they have in-house expertise. Common areas of focus include business services, healthcare, consumer products and services, software and tech-enabled services, industrial and manufacturing, and financial services. Real estate, oil and gas, and cryptocurrency are more often excluded, as they typically require a very specific type of investor with underwriting approaches that differ from those that are employed in most middle market non-control equity investments.
How the Process Typically Works
If you decide to explore this path, the process usually starts with a detailed financial review of your company and a clear articulation of your financing goals — growth, de-leveraging, liquidity, or a minority buyout. From there, a credible advisor will typically arrange an independent desktop valuation from a reputable accounting or valuation firm to make sure expectations between you and prospective investors are realistic from the outset.
Next comes preparation of the materials investors will need for diligence: a fully-linked three-statement financial model, a confidential information memorandum, and supporting due diligence materials. An experienced advisor will strongly recommend that you procure a sell-side quality of earnings report, generally prepared by a top 10 accounting firm, which can play an important role in supporting your numbers and strengthening your negotiating position when the time comes.
A capital advisor with the requisite expertise can also help structure the financing, including the type of securities offered, such as convertible preferred or participating preferred stock and potentially a debt component, if that is part of the company’s financing plans.
One important distinction is how prospective investors are approached in a middle market sale of non-control equity. Rather than running a broad auction that blasts the opportunity to hundreds of potential buyers, non-control raises are usually handled through a more discreet, targeted process, generally entailing a short list of roughly a dozen prospective investors that have specific expertise in your industry and are aligned with the outcome you're looking for.
This more bespoke approach tends to protect confidentiality and is generally a better fit for a transaction where you're choosing a long-term financial partner, not just selling to the highest bidder.
The Bottom Line
For years, giving up control of your company was widely considered to be your only move for raising equity capital. But that’s no longer the case.
If your company needs growth capital, a well-structured non-control equity investment may let you access institutional capital and strategic expertise while keeping your hands firmly on the wheel: Entrepreneurial control freaks, take notice.
1. White & Case “Minority report: Minority stakes spike in US and Europe for sponsors and strategics alike”. https://mergers.whitecase.com/highlights/minority-report-minority-stakes-spike-in-us-and-europe-for-sponsors-and-strategics-alike#!
2. PitchBook, "Growth Equity" research topic page. https://pitchbook.com/tag/growth-equity
3.CT Acquisitions, "Growth Equity vs Private Equity: Key Differences Explained in 2026," (citing PitchBook's 2025 Annual US PE Breakdown). https://ctacquisitions.com/growth-equity-vs-private-equity/
About the Author:
David Schachter is President of Reedland Capital Partners, a boutique investment banking firm founded in 1997. Reedland is focused on structuring and arranging institutional debt and equity financings from $20 - $200+million for middle market and emerging growth companies. Its work spans acquisitions, growth capital, dividend recaps, buyout of minority shareholders, de-leveraging existing debt, and debt refinancings.
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