Before You Sell

A note to business owners. And to the PE firms watching them.

TLDR:

• If you're running a traditional business and getting ready to sell: don't. Not yet. Build AI into your operations first. Go to market as an AI-powered business. The difference in valuation is not marginal.

• If you're a PE firm: you already know this. You're counting on sellers who don't.

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I was speaking recently with a boutique M&A advisor. He mentioned a company in his pipeline, a construction business, getting ready to go to market. Good revenue, solid team, strong reputation. The kind of business that attracts buyers.

I told him the owner should wait a year.

He looked at me like I'd suggested canceling Christmas.

My reasoning was simple. That company, as it stands, is a good business. With twelve months of aggressive AI implementation across its operations, it could be a great one. And the valuation difference between good and great, in a market where buyers are getting sharper about technology, is significant.

This applies to construction. It applies to logistics, manufacturing, professional services, hospitality, healthcare. Any traditional business where operations still run on spreadsheets, institutional knowledge, and the experience locked in a few key people's heads.

Of course, the PE firm on the other side of that deal is hoping the owner doesn't listen to me.

Let me use construction to make the case. It's the last industry anyone expects to be transformed by AI. Which is exactly why it's the most interesting one to look at.

To the Seller

Let's start with you. You've built something real. Revenue, reputation, relationships. Twenty years of showing up, winning bids, delivering projects. You've earned the exit.

But the ground is shifting underneath your industry while you're preparing the data room.

The U.S. construction sector needs 349,000 new workers in 2026 just to keep pace. In 2027, that jumps to 456,000. Ninety-two percent of firms that are hiring report trouble finding qualified people. Wages are climbing 4% year-over-year minimum, 20% in some regions. The skilled labor shortage costs home builders alone $10.8 billion a year.

You know this. You live it. Every project is a staffing negotiation now.

What you may not know is how fast your competitors are responding. ServiceTitan surveyed over 1,000 construction leaders this year. The result: 38% now report measurable business impact from AI. Up from 17% a year ago. Adoption more than doubled in twelve months.

The top use cases: cost estimation (24%), bid management (22%). The exact functions that determine whether you win work and at what margin.

Contractors using AI for estimating are cutting proposal time by 75-90%. Going from 3 bids per week to 5, same headcount. More shots, more wins, more revenue. And only 10% of contractors see AI as a competitive advantage yet. Which means 90% haven't clocked what the 10% are doing.

Now think about your business through a buyer's eyes.

Your estimating process: is it in someone's head, or in a system? Your scheduling: spreadsheets or dynamic optimization? Your procurement: phone calls and relationships, or data-informed across suppliers? Your contracts: drafted from scratch every time, or generated, reviewed, and flagged by intelligent software?

Every one of those workflows can now be augmented with tools that didn't exist two years ago. Estimating, bidding, scheduling, procurement, contract drafting, compliance tracking, subcontractor coordination, change orders. All of it.

And this is the part that matters for your exit: the software you build around your operations isn't a cost. Once it's running, once your team depends on it, it becomes an asset. Part of the business. Part of the valuation. Custom systems that wrap around your specific workflows and optimize them in ways that were never economically viable before. Software that you own and that makes your company measurably better at what it does.

McKinsey estimates AI could unlock $18 billion in value for home builders alone. Deloitte puts project cost reduction at 10-15%. For an individual company doing the work properly, the gains can be much larger.

Every traditional industry has its version of this. The dental practice chain where patient scheduling, billing, and follow-up reminders are still manual. The logistics firm where route optimization lives in a dispatcher's head. The manufacturer where quality control is a clipboard and a flashlight. In each case, the AI layer is there to be built. In each case, it changes what the business is worth.

Spend a year building this. Go to market with an AI-powered operation. You'll be selling a different company. At a different price.

To the Buyer

Now let's talk to you. You can skip the section above. Or actually, don't. It's useful to understand what sellers are thinking. Mostly because you're thinking three steps ahead of them.

PE has always been an operational playbook. Buy a good business, professionalize the management, optimize the cost structure, add some leverage, grow the top line, exit at a higher multiple. The playbook works. It's worked for decades.

AI is the newest lever. And it might be the most powerful one you've ever had.

Think about what you already do in the first hundred days after an acquisition. You audit every function. You find the inefficiencies. You bring in systems, processes, people. You squeeze margin out of operations that the founder was too busy (or too sentimental) to optimize.

Now imagine a construction company that's still running on spreadsheets, institutional knowledge, and a senior estimator who's turning 62. That company is your dream deal.

You see the play already. Implement AI across estimating, bidding, scheduling, procurement. Cut proposal times by 75%. Increase bid volume without increasing headcount. Reduce estimating errors that lead to cost overruns. Optimize crew scheduling around real constraints instead of gut feel. Automate the contract and compliance work that eats administrative hours.

The labor shortage is your friend here. In an industry that can't hire its way to growth, the firm that can do more with fewer people has a structural advantage. And you can build that advantage in twelve months.

You'll pay for the business at today's valuation, pre-transformation. You'll exit at tomorrow's valuation, post-transformation. The spread is the opportunity.

This works beyond construction. A PE-owned services firm where you automate the back office. A portfolio company in manufacturing where you implement predictive maintenance and cut downtime by 30%. A chain of clinics where you build AI into patient intake, scheduling, and insurance processing. The playbook is the same: acquire at a traditional multiple, transform with AI, exit at a technology multiple.

The diligence process is already evolving. You're asking new questions about targets: what's automated, what's manual, where's the technology layer, how dependent is the operation on specific individuals. A company with AI baked into its workflows is worth more. A company without it is a discount waiting to be captured.

The interesting question is whether sellers figure this out before you do.

So far, most haven't.

The Widening Gap

There's a chart from Ramp that I wrote about recently showing AI-adopting companies doubling their revenue since 2022 while non-adopters flatline. Construction is one of the clearest examples of that split, but the pattern runs across every traditional industry where operations are still manual and labor is scarce.

Two similar companies go to market. Similar revenue, geography, customer base. One spent the last year building AI into its operations. The other didn't.

One sells at a premium. The other sells at a price that reflects what the buyer plans to do with it.

If you're selling: build the AI layer first. Capture the value you created.

If you're buying: find the ones who didn't.

And if you're smart, move quickly. The sellers are starting to catch on.

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Sources

• ServiceTitan 2026 Commercial Specialty Contractor Industry Report (March 2026)

• Associated Builders and Contractors, Construction Workforce Gap Analysis (January 2026)

• Deloitte, 2026 Engineering and Construction Industry Outlook

• McKinsey, AI Use Cases for Construction Industry

• Associated General Contractors of America, 2025-2026 Workforce Survey

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We're Exponential Partners. We work on both sides of this equation: helping companies build the AI layer that transforms their operations, and helping investors assess AI readiness in the businesses they're evaluating. Visit us at exponentialpartners.io.