There are strategies available for business owners who are in need of additional capital to grow their business. The partial sale transaction has gained popularity over the last couple of years. When business owners find themselves with limited operating liquidity, they are unable to create the type of growth they desire. A partial sale can bring additional resources into the business that can set into motion long-term growth strategies, increase operational stability and recruit new hires. If you are looking to downsize your company, you can invest that money into different opportunities that may offer you a higher return on your investment.
A partial sale of your business gives you the opportunity to remain involved in the business that you have spent decades building. Following a partial sale, many business owners serve as advisors, senior executives, board members, etc., to assist the buyer with their transition period to new ownership. Smart buyers are open to customizing the role and involvement of the seller once the deal has closed in order that the seller remains with the business for months and years to come.
You may have grown the business into a large company through various acquisitions and development that haven't delivered quite as well as you had hoped. A partial sale of your business can allow you to let go of some of those units that you may be in need of recouping a loss from. Selling these portions can put you into a better position financially and allow you to invest additional resources and time into the areas of the company that are functioning well. The result of this action can leave you financially sound as you reduce the risks that your company would have faced in the future. In addition, there is the potential that synergies with the buyer could create even more opportunities and profits for the remaining units of your business.
Another benefit to a partial sale is gaining a powerful partner who is just as invested in the business as you are. This partner is interested in the company's aggressive growth in a way that your employees most likely aren't. If you have too much on your plate, it may distract you from your company's core items that you should be focusing on. In the best case scenario, this partner will help revolutionize the company's future through their industry contacts, leadership experience, new technology, and relationships in new markets. Having a partner makes it possible for you to trust them with business decisions when you can't be everywhere at once, or you want to take some needed vacation time.
The option for a business owner to take a portion of its proceeds as equity ownership of the new or acquiring company gives the seller a "second bite of the apple". The sellers, the owners, and the founders take some of their proceeds and roll it over in equity and ownership of the new or acquiring company. This roll-over equity can be quite valuable as sellers often generate additional wealth with the second sale of the business or possibly a third of the appreciated combined entity. Typically roll-over equity can be structured on a tax-deferred basis with no taxes paid at closing. The taxes are usually paid when you sell that equity and convert it to cash. Once you have taken most of your equity off the table with the first sale, you may find that you can now have fun seeing how aggressively you can grow the business with the right partner and capital available. It is not unusual for the second sale to be larger than the first.
A partial sale of your business can allow you to retain the ownership of your business that you are not yet ready to let go of and acquire the liquidity needed to grow the company and potentially have a full sale at a later date. Hopefully, at a higher valuation after taking the company to the next level.
Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkIntl.com
Europe: Michael Lawrie at +44 (0) 161 359 4400 / Enquiries@BenchmarkIntl.com
Africa: Anthony McCardle at +27 21 300 2055 / McCardle@BenchmarkIntl.com
ABOUT BENCHMARK INTERNATIONAL
Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $8.25B across various industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 14 offices across the world, have assisted thousands of owners with achieving their personal objectives and ensuring the continued growth of their businesses.