Private equity and its advantages for bakery owners

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Private equity and its advantages for bakery owners

5 Dec 2025

Nick LaRosa

Nick LaRosa is a VP at New Water Capital, a private equity firm investing in lower-middle-market consumer and industrial manufacturing and distribution businesses, with a major focus on the food industry. Current food investments include Klosterman Baking Co., Dutch Gold Honey and Pegasus Foods. Contact him at nlarosa@newwatercap.com.

KANSAS CITY, MO — For many family-, founder- and entrepreneur-owned bakeries, selling the business is one of life’s biggest milestones. Generations of hard work go into building the company, nurturing a skilled workforce and establishing a brand that attracts lasting customer loyalty. When considering a sale, selecting the right buyer is just as crucial as the decision to sell.

Private equity (PE) has become a dominant player in the US deal landscape, accounting for more than half of all merger and acquisition (M&A) transactions in a typical year. That means when a business owner thinks about selling their bakery, it’s highly likely that a PE firm will be among the interested buyers. The advantage of partnering with PE is that it can be a powerful growth partner, providing capital, strategic guidance and operational resources. The challenge is in ensuring the partnership is the right fit for both parties.

For bakers and PE alike, the partnership should be built on trust, transparency and a shared vision of the future. So, how do both sellers and buyers know if the partnership will truly be successful? Here are several key considerations, drawn from both perspectives, that should be top of mind for each side.

What bakers should ask of PE

Do they understand the industry? Not all capital is equal, and not every PE firm brings experience in bakery or even food manufacturing. It’s crucial for a potential partner to understand the nuances of the bakery sector: commodity price swings, labor shortages, seasonality, long sales cycles, capital intensity, logistics challenges and the balance of retail vs. foodservice demand. A partner without this knowledge may underestimate what’s required for success in the industry.

Can they bring more than money? The best PE partners add real value beyond capital. They help guide the strategic plan, open doors to new national accounts, help recruit key leaders as the business scales, and provide expertise on capital projects such as plant expansions or automation. There are many challenges the bakery industry faces that actually present opportunities for an investor with relevant experience and the ability to bring practical solutions to the table.

Do they share the vision and expectations? A partnership works best when both sides share a clear vision for the future. Where do you see the bakery in five or 10 years? Will it expand geographically or diversify into other products or channels? It’s essential that the PE firm’s investment thesis aligns with the vision and that its timeline for returns doesn’t create unnecessary pressure on the business.

Who will the team actually work with? Relationships matter. The team that courts the sale may not be the same one people work with after closing. Ask early on: Who will be the day-to-day contact? How often will they meet with the team? Will they be hands-on or hands-off? Clear communication upfront builds trust and helps avoid unexpected challenges.

What’s their track record? Finally, dig into their history. Have they successfully guided other family-owned businesses through transitions? Do they have examples of solving challenges like capacity expansion, customer onboarding or bolt-on acquisitions? Whenever possible, gather references directly from prior owners and CEOs who have experience working with the potential PE buyer.

What PE should ask of bakers

How strong is the go-to-market strategy? For investors, the first step is to understand the bakery’s core strengths. Is it a leader in fresh or frozen, branded or private label? Does it dominate a region or supply national chains? Understanding the company’s position across product lines, sales channels and geographic markets is key to determining its scalability.

Is the business prepared for growth? PE firms invest with one goal: to help businesses grow and create value. Achieving strong returns depends on the company being bigger, stronger and more competitive at exit than it was at entry. That growth, however, is rarely driven solely by customer demand. More often, the real obstacles are inside the four walls of the business: capacity, systems or talent.

PE firms should ask hard questions early: Is the plant operating at full capacity? What will it take — in terms of time, cost and disruption — to add a new line or facility? Are existing enterprise resource planning and quality systems robust enough to serve larger retail or foodservice customers? Does the management team have the depth of experience to lead through expansion?

Identifying these bottlenecks upfront allows both sides to be realistic about the growth journey. When gaps exist, strong PE partners should be prepared to provide more than capital, offering operational expertise, leadership support, and resources to remove barriers and unlock the next stage of growth.

What role could M&A play? In a fragmented industry like bakery, acquisitions can unlock new customers, products or geographies. However, M&A also brings potential integration challenges. Does the team have the skills necessary to execute alongside the guidance of the PE firm? Will customers benefit from the combination? Are the projected synergies achievable?

A two-way street

It’s easy to forget due diligence runs both ways. While PE firms conduct rigorous reviews — digging into financials, operations and market position — bakers should be equally thorough in evaluating their potential partner. Both sides need to ask hard questions upfront, clarify expectations and confirm their visions align.

Equally important is cultural fit. Even when the numbers and strategies look promising, mismatched values or working styles can derail a partnership. For a family-or founder-owned bakery, it matters whether the PE firm respects the heritage and culture that built the business. Likewise, investors should gauge whether the company’s leadership team is open to new ways of operating and disciplined execution. A shared culture of transparency, accountability and mutual respect can be just as critical as financial performance in determining long-term success.

When the partnership is right, the results can be transformative. Bakeries gain access to capital, expertise and networks that accelerate growth. Investors gain a resilient, in-demand business with strong customer relationships. Together, they can scale faster, serve more customers and weather industry challenges with confidence.

This has been adapted from the October | Q4 2025 issue of Commercial Baking. Read the full digital edition here.