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Status Quo Minority Sale Majority Sale Full Sale ESOP
Retained Ownership 100% >50% Typically 10-40% 0% Varies
Operational Control Maintained Maintained Released Released Maintained
Financial Value None Realized Partially Realized Partially Realized Fully Realized Varies
Leadership Continuous and Uniform Continuous Continuous and Dynamic Dynamic Continuous
Risks Highest Liquidity and Execution Risk Partial Reduction in Risk Major Reduction in Risk Full Reduction in Risk Partial or Full Reduction in Risk
Potential Benefits -Stability in the direction and the leadership of the business

-Maintain operational and financial control

-Investors provide additional capital support

-Ability to participate in the future growth of the business

-Partner willing to support growth or acquisition initiatives

-Access to strategic resources: logistics, IT, HR, etc.

-More robust financial reporting

-Investors provide additional capital support

-Ability to participate in future growth of the business

-Access to strategic resources: logistics, IT, HR, etc.

-Access to value-added support and strategic guidance

-“Professionalization” of the business

-Business value is fully realized and can be reinvested into lower risk investments

-Access to strategic resources: logistics, IT, HR, etc.

-Access to value-added support and strategic guidance

-Complete alleviation of execution risk and succession planning concerns

-Potential tax-free sale

-Rewards employees

Keeps company’s culture in place

-Allows owner to “structure” exit

-Low execution risk

-Maintain control while providing liquidity for the owner

Potential Implications -Must fund the Company with internal cash flows

-No way to monetize value in the Company beyond dividends or salaries

-No new “blood” to diversify leadership

-Complete execution risk lies with Management

-Succession planning not addressed; “till death do you part” strategy

-Middle management likely to stay post-transaction

-Partner to share execution risk

-Board representation / quarterly board meetings

-Negative covenants, minority shareholder protections

-Required exit in future (equity recap only)

-Partner will seek aggressive growth and/or acquisition initiatives

-Middle management could be eliminated post-transaction

-Partner to share execution risk

-Allows current ownership to transition out of the business over time

-Cultural impact to the business

-Integration risk

-No participation in the future of the business

-No outside expertise or synergies from potential partners

-Repurchase liabilities

-In a partial that moves to a full, valuation can be lower in a staged transaction

-Cash flow to service debt and growth could become constrained