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one’s assets, which in turn reduces stress and risk! Partial Selling less than 100% of one’s
sales additionally reduce personal financial risk by often
removing personal guarantees on company debt. company to an outside buyer/
Two: Keep a Portion of the Company for a Later Sale investor is usually called a private
Typically, the second most attractive benefit of a recapitalization, or recap for short.
private recap is that one maintains some ownership in Any amount can be sold, and private
the company to sell the rest of your ownership at a later
date after the company has hopefully increased in value recaps occur where the buyer acquires
with continued growth. In this way, private recaps are often anywhere from
described as opportunities to “take a second bite of the apple.”
Three: Stay Involved with the Business…Or Not 10% to 90%
Another powerful advantage is one can customize his/
her involvement in the business after the partial sale. If of the target company.
the owner wants to remain fully involved in the business’s
leadership and management, he/she potentially can. Or, if
one wishes to scale back his/her participation to a purely cutting-edge technology, and/or injecting industry-leading
strategic or advisory role, such as serving on the board of leadership and experience. More modest benefits can
directors. This, too is commonly done. It is even possible include operating cost reductions and efficiency gains if
to completely step down from all involvement in the the partner brings larger economies of scale or greater
company management or leadership and become a “silent market credentials.
investor.” This benefit allows you to pursue any degree
of involvement—as long as the buyer agrees with and Seven: Achieve One’s Exit Goals
supports the plan. Perhaps the most common scenario is A partial sale of the business can be a key tactic in exit
selling a portion of the company but remaining involved planning to achieve one’s exit goals. Like most business
with day-to-day leadership, especially if one intends to owners, one may seek to reach financial freedom, end on
enjoy that second bite of the apple later in the future. one’s own terms, and leave the company in good hands.
(Watch our recent webinar called “Cash Out Without Whether one ultimately intends to sell the company to an
Walking Out” to learn more.) outside buyer, sell to your management team, or give the
business to one’s children, a partial sale can secure one’s
Four: Secure Different Outcomes for Different major goals.
Owners
If one has business partners, a private recap can allow Conclusion and Next Steps
different owners to pursue and potentially achieve separate Private recaps are not for every owner or every
and seemingly incompatible, individual goals. For example, company. Buyers/investors look for consistently profitable
perhaps one owner is older and seeks to sell some to all of companies that, offer strong growth potential, and have
his or her ownership, but another owner is younger, eager capable leadership. Another point to consider: a partial
to stay involved, and wants to increase his or her own- sale may receive a lower valuation multiple than might
ership. A partial sale can potentially accommodate these be achieved with a full sale, especially if the buyer is only
differing goals, whereas a full company sale could not. acquiring a minority position. However, this potential
disadvantage is offset with the opportunity to pocket
Five: Create an Equity Path for Top Employees some liquidity now and retain ownership for the full sale
Another advantage of the partial sales is the ability at a later date—hopefully at a higher total valuation after
to create an equity sharing plan for top employees who having grown the company to the next level.
currently lack ownership. Within a partial company sale, Next time you find yourself asking, “Should I sell my
an equity pool can be created to incentivize top employees. company?” consider rephrasing that question to read,
“How much of my company should I sell?” Contact us to
Six: Gain a Powerful Partner get help answering this critically important question. N
With any partial sale, a new business partner enters
the picture—the person or organization who purchases Patrick Ungashick is the CEO and founder of NAVIX
the partial interest. Ideally, this partner brings skills, Consultants. He is nationally recognized as the authority
knowledge, resources, and opportunities that one’s on exit planning for business owners. Patrick is also the
company leverages into accelerated growth. In the author of two books to help owners get ready for their
best scenario, this new partner can revolutionize the exit: Dance in the End Zone, and the award-winning A
company’s future: providing capital for expansion or Tale of Two Owners. Patrick can be reached via email at
acquisitions, opening doors to new markets, introducing pungashick@navixconsultants.com.

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