Page 8 - NBIZ JUNE 2024

SEVEN REASONS

Why Selling Just a Piece of Your

Company Might Make Sense

By Patrick Ungashick

usiness owners often think about exiting as an company is to be sold. Therefore, whether or not one sells
all-or-nothing event. For example, “Should I more than 50% largely impacts the person in charge of
sell my company?” is a more commonly asked the day-to-day operations of the company.
Bquestion than, “How much of my company Potential buyers include wealthy individuals, private
should I sell?” Yet, in many situations, selling only some equity groups (PEGs), family offices, and sometimes other
of one’s business can achieve many of his/her exit goals, companies that see a strategic fit with your business.
while leaving the owner with a portion (and perhaps even Buyers will often use a combination of equity and debt
a controlling portion) of one’s business. Here’s how. when they purchase a portion of an operating company.

The Basics of Partial Company Sale Advantages of Selling a Piece of Your Company
Selling less than 100% of one’s company to an outside Business owners are often surprised by the powerful
buyer/investor is usually called a private recapitalization, advantages that can come with a partial sale of their
or recap for short. Any amount can be sold, and private company. Following are the are the seven most common
recaps occur where the buyer acquires anywhere from and relevant advantages:
10% to 90% of the target company. A critical question
is whether the buyer acquires a controlling interest in One: Get Cash and Reduce Personal Risk
the company, meaning, of course, more than 50% of the Probably the number one benefit of a partial sale is it
voting stock. However, buyers who acquire less than 50% offers an opportunity to convert some (but not all) of one’s
will still negotiate into the deal-specific ownership rights, ownership into personal cash. Private recaps are often de-
called supermajority rights, that give them a direct say scribed as “taking some chips off the table” for this reason.
in strategic issues such as whether or not the entire Getting cash increases personal liquidity and diversifies

8 NBIZ ■ JUNE 2024