Entrepreneurs, A. J. Wasserstein has observed, tend to dream about the day of exit. They picture the sale of the business they have spent years building: the wire transfer, the newfound wealth, the free time, the investors offering congratulations. The exit sits in the imagination as a fireworks moment, the culmination of hard work rewarded with a lottery ticket and a walk into the sunset.
The trouble, according to Wasserstein, who is Eugene F. Williams, Jr., Senior Lecturer in the Practice of Management at the Yale School of Management, and one of the most widely read scholars of entrepreneurship through acquisition, is that this picture is almost entirely wrong. “I describe it like this,” he says. “You have one hell of a party. Then all the guests leave at 11 or 12 o’clock. And you’re standing there thinking, I still have to clean everything up. Everyone had a great time – but there is still a lot of work to be done.”
I don’t think most people entering the ETA system have the forethought to understand that they’re signing up for at least two chapters, whether they realise it or not
It is a characteristically vivid image from a researcher whose recent work has set out to test one of the more comfortable myths of the acquisition-entrepreneurship world. In a study of first-round CEO exits among mostly classic search fund operators in this dataset, Wasserstein and Keith Burns, his co-author, found that for most operators the exit is not, in any meaningful sense, an exit at all. It is a handover to a second set of owners, a new and very different relationship, and – for a surprising number – the beginning of a bumpy chapter in the journey.
The findings are stark. Roughly two-thirds of the CEOs surveyed stayed with their businesses beyond the first sale rather than walking away with cash in hand. A similar share rolled equity into the new ownership structure – a median of around 30 percent of their stake – meaning that a large part of their financial reward remained locked inside a company they no longer controlled. And the buyers on the other side of these deals were, overwhelmingly, private equity: around three-quarters of the acquirers were PE firms or PE-backed operating companies. The exit, in other words, tends to bind operators to their businesses rather than free them – and to bind them to a particular kind of new owner.
Wasserstein is careful not to oversell the novelty of this finding. “We knew this going in, so it wasn’t a complete surprise or a secret,” he says. “What we wanted to do was quantify the scale of it. Who are the buyers? What is the incidence of having to stick around as human capital? What is the incidence of having to roll equity? Who drives the buyer decision? And maybe most importantly, how do CEOs really feel about their new partners?”
His central worry is one of foresight. “I don’t think most people entering the ETA system have the forethought to understand that they’re signing up for at least two chapters, whether they realise it or not. The first chapter is with their initial partners. The second is with the successive partner. I want people to go in with their eyes wide open.”
Sometimes the first chapter ends earlier than anyone planned. Told of an operator whose investors wanted to sell on a timeline he did not share – he was eager to keep building; they wanted their return – Wasserstein nods in recognition. “That happens also,” he says. The party can end before the host is ready.
If the difficult truth about exits is so well established, why is it so rarely discussed? Wasserstein resists the language of a cover-up. “I don’t think it’s a lack of candour, and I don’t think anyone is being deceptive,” he says. “This is a whole machine now. There’s a lot of capital trying to get to work, and that capital needs human capital to make the whole system function.”
The result, he suggests, is a set of things that get underplayed. “Investors and academics, myself included, tend to undersell failure rates. We undersell the emotional toll. We undersell how skewed the outcomes are. ”None of it is malicious; it is simply not where the spotlight falls. “No one stands up in a classroom or at a conference and says: this is going to be hard and lonely, it might not work, and you are going to stick around and roll equity when we sell.”
One of the study’s more provocative findings is that some three-quarters of CEOs drove the selection of their own buyer – and that many later expressed dissatisfaction with the outcome. It is tempting to read this as regret, or as evidence of a bait-and-switch by incoming investors. Wasserstein pushes back on both interpretations. “I’m not sure they regret the choice they made. I think it’s a structural challenge. The second-round investors are just very different from the first-round investors.”
That difference is the heart of the matter. An initial fund often has a diffuse ownership structure, with a coaching-and-mentoring relationship as the foundation. The typical second-round buyer – about three-quarters of them private equity firms or PE-backed operating companies – is a concentrated, single, dominant majority owner. “It calls the shots, and you’re very explicitly working for them.”
Is there a bait-and-switch? Wasserstein chooses his words with care. “Anytime someone is selling money – and that’s what second-round investors are doing – they’re trying to convince you their money is better and that they should be the prevailing bid. They’re on their best behaviour. It’s like a first or second date. No one shows their worst colours on the first date.” But that, he insists, is not deceit; it is courtship. “I don’t want to call it malicious. It’s just how it goes.”
And many of these operators, he points out, are not naifs. “A lot of these men and women come from private equity. They were those people, frequently, in their last job. They’re not completely uninitiated in what it’s like on the other side of the curtain.” They are typically guided by their investors toward the best price, accepting whatever else comes attached. “Maybe they know exactly what they’re getting into. It doesn’t mean they have to like it.”
One of the study’s most talked-about data points is the net promoter score that the surveyed CEOs gave their post-exit experience: negative 33. It is a measure of how many would recommend the experience to others versus how many would warn them off, and a negative reading means the warnings outnumber the recommendations. Wasserstein does not gloss over it. “It’s a striking figure. If a company posted a score like that, people would take notice.” It is best read, though, as a single snapshot of sentiment rather than a verdict on the model, and, as the study shows, sentiment shifts markedly over time.
The shape of the number over time is what makes it interesting. Satisfaction does not decline steadily; it collapses in the middle years and then recovers past the five-year mark. Wasserstein offers his reading as a hypothesis. There is, first, a honeymoon – everyone getting to know each other, on good behaviour. Then comes the settling in, and with it a hard realisation. “You work for me now. You might not realise it yet. We built the capital structure, we’ll shape the strategy, and here’s the plan – which we formulated without you before the acquisition. Now go execute it.”
The help operators want, he suggests, is often emotional as much as strategic.
The recovery, he suspects, is partly survivorship. “The people who really hated it left. They took themselves out of the system. The people who found their place, or made their peace, stuck around, and the score climbed back up.” There may be a financial dimension too. The data hinted at an association between stronger performance and higher satisfaction. “When you’re crushing it financially, some of those overlords leave you alone more. Maybe the sting isn’t as painful.”
The survey turned up an apparent contradiction. The most-cited source of frustration among CEOs was micromanagement – investors too involved, too far into the operational weeds. The second was the opposite: investors who were passive, distant, and uninvolved. How can both be true at once?
“Number one is, you’re in my shorts. Number two is, you don’t pay attention to me,” Wasserstein says, laughing at the tension. “But those two things can coexist, because humans aren’t rational when they answer surveys. What it probably means is: you bother me when I don’t want to be bothered, and you’re not around when I could actually use some help.”
The help operators want, he suggests, is often emotional as much as strategic. “I’ve been a CEO and I’ve been a board member. Sometimes as a CEO you’re working incredibly hard, doing great, and it feels like nobody acknowledges it. Once in a while it would be nice for someone to say, "You had a great quarter, that’s amazing, you should be proud.” Instead, many get the stick on the downside and silence on the upside.
The structure of private equity compounds the problem: a buyer is not one person but many. “There’s the junior person, the mid-level, the senior. Sometimes these CEOs are getting it from three or four different angles, the same questions over and over, and the people within the same firm even conflict with each other. The CEO is like the child caught between two fighting parents.”
Beneath the numbers is something harder to quantify: what this transition does to a person. Here Wasserstein does not hedge. “It’s tough. It’s a really hard transition.”
He describes the fall from a great height. “You go from feeling like the captain of your ship, with a high degree of independence and autonomy, to someone different. You were the architect, the leader, the builder, doing something forward-looking. And then you get acquired, and suddenly there’s a boss – someone who feels like they own you.”
The indignity is sharpened by what the new owner takes and what it leaves behind. “The private equity firm has a pointed view on strategy – otherwise they wouldn’t have written the check – and they’ve built the financial plan. So they take the parts most people consider the fun parts of being a CEO, the finance and the strategy, and they leave you with operations and people.”
The rolled equity makes leaving hard. “Sixty-five percent of these people have to roll equity, so they’re stuck. A big chunk of their financial stake is embedded in the new entity. They have to believe in that new owner if they’re going to take their hands off the wheel.” Most, he says, grin and bear it until the next liquidity event, then look to replant themselves somewhere they can recover the autonomy they lost. “A lot of the selling point in the ETA world is that you’ll have a pot of gold and a high degree of independence. Then the first exit happens, and much of that independence evaporates. It stops feeling like what they signed up for. I don’t say that’s anyone’s fault. It’s the nature of the beast.”
Another study, written in July 2025 with Alex Hodgkin of the University of Chicago’s Booth School, turns from diagnosis to remedy: how might operators and their private equity buyers collaborate better once the deal is done? Wasserstein resists being cast as either optimist or pessimist about the relationship. “I’m an academic. The first paper was data-based – the numbers told the story, not me. And the numbers came back not so encouraging, so an appropriate follow-up was: how can these parties play together better?”
Where the first study heard only from operators, the second listened to both sides. “In many ways they’re watching the same movie with slightly different interpretations – two sides of the same coin.” But one asymmetry sits underneath everything. “These private equity investors have a fiduciary loyalty that runs to their limited partners, not to the CEOs. In the triangle of CEO, limited partner, and firm, the CEO isn’t necessarily first on the list.” The operator, meanwhile, wants something simple and human. “We heard it over and over: just treat me the way you’d treat yourself: The golden rule. And that’s totally fair.” The buyer’s answer is equally understandable. “I just wired you and your team a fortune. The game is mine now, and these are the rules. Wake up to your new reality. And you know what? That’s fair too.” What both sides agree they want, he notes, is more communication.
Wasserstein’s dataset is North American, shaped by the deepest and most mature private equity market in the world. For a European audience, the obvious question is how much of it carries across the Atlantic. He answers, as ever, without overclaiming. “I’m not going to pretend I know. But if I had to form a hypothesis, I’d guess the findings are similar. It’s more a function of the underlying structural issues than of geography.”
There is one variable he is willing to isolate. “The difference might be if the private equity market in Europe is less developed. If there are far fewer private equity buyers, and a different buyer profile, some of these dynamics may not be identical.” That is a meaningful caveat in a European context, where the second-round buyer universe is thinner and more varied than in the United States.
There is a second difference that goes to the heart of how acquisition entrepreneurship is practised on the two continents. The American search fund archetype is a young MBA, newly graduated, seeking a fast track to leadership. The European model often tilts toward management buy-ins (MBI) led by seasoned operators – people with 10 or 15 years of profit-and-loss experience behind them. Does that change the picture? Wasserstein thinks it might. “Maybe they’re more seasoned. They know the ways of the world. And depending on how the initial deal is structured, maybe they’re not looking for an exit and an equity pop at all. Maybe they’re looking for a stable, long-term operating role.”
This is the crux for the European reader. If an operator never wanted the fireworks exit in the first place – if the goal was a durable business to run, not a quick liquidity event – then the disappointment Wasserstein documents may simply not apply. Yet he is not sure the deeper tension disappears. “At any stage of the game, a lot of people gravitate toward this path to get control of their calendar and their life, to have autonomy, to not have other people tell them what to do. It would be totally rational to trade compensation for independence. So even if they’re doing these MBIs mid-career, if they lose that autonomy and independence, I’m not sure it sits any better with them.”
Whether European operators even want the exit their American counterparts are denied is, he suspects, the question that most separates the two worlds. “If you’re mid-career, you probably don’t want to bounce around a lot. You’re looking for a longer runway and geographic stability. The search crowd that’s earlier in the game is more willing to restart a couple of times – and in the U.S. a lot of them ultimately want to move into investing.” The implication is significant: the post-exit unhappiness he measured may be, in part, an artefact of a particular kind of young, restless, American searcher – and the European operator, older and rooted, may be playing a different game.
For all the bleakness of his data, Wasserstein is no sceptic of the model he studies. “I think ETA funds are a great opportunity for young, aspiring entrepreneurs. I’m a fan.” His counsel is not avoidance but clear sight. “Prospective entrepreneurs should view the opportunity holistically, in totality. There are good things and not-so-good things, and you have to make a decision on a probabilistic basis. Part of that’s financial, and part of it is: what is my life going to look like?”
The post-exit reality Wasserstein has documented is, in his own estimation, not disqualifying. “I’m not sure this one element is ugly enough to say don’t do it. It’s one part of the package.” The point of the research, in the end, is not to dim the dream but to complete it – to make sure that when the operator finally throws the party, they understand that someone will still have to clean up afterward, and that it will most likely be them.
“I hope the paper illuminated the notion that the CEO gets caught a little bit in these big grinding gears,” he says. “Eyes wide open. That’s all.”
Peter Hajdu, Senior Special Adviser, All Interests Aligned
Wasserstein's research documents a real tension, and I don't think the answer is to pretend it away. When the first major liquidity event happens and a new owner – often a PE firm – steps in, the operator faces a fresh challenge: rebuilding trust, demonstrating value, and earning the autonomy they had before. No amount of pre-exit planning eliminates that conversation. You still have to have it with the new owners.
What you can control is how well-prepared you are to have it.
At AIA, we spend considerable time with our Operating Partners before any acquisition takes place – aligning on strategy, expectations, and what a successful outcome actually looks like. That process doesn't inoculate an OP against the pressures Wasserstein describes. But it does something arguably more valuable: it builds the habits of thought and communication that experienced operators need when they're sitting across the table from a new investor who doesn't know them yet.
And that word – experienced – matters more here than it might appear. AIA's OPs are not freshly minted MBA graduates finding their footing. They are senior executives with many years of operational leadership behind them. They have navigated boardroom changes, ownership transitions, and strategic pivots before. They carry the scars that Wasserstein's dissatisfied operators might lack.
A good exit, in our view, is not just a financial event. It's the beginning of a new ownership relationship – one that our OPs are equipped, by experience and by preparation, to build well.
Mukul Pandya is the founding editor of Knowledge@Wharton and a former Associate Fellow at Oxford University’s Saïd Business School. He writes regularly about entrepreneurship through acquisition for All Interests Aligned.
