Selling a North Carolina business to a private equity group is a two-step process that allows owners to maximize their earning potential. First, the group will buy a majority stake in the business while allowing the owner to sit on the board or otherwise have a say in how the company continues to grow. The idea is to scale the company, get a higher valuation and then sell the remaining stake.
For most, this can be an effective way to sell a company. However, it may not be for everyone. In some cases, existing owners may not fully understand that their partial share will ultimately be worth more than it would if they had retained full ownership.
One business owner sold a 60 percent stake of his company to a PEG that was valued at $18 million total. Four years later, the company was sold for $98 million with the owner of the company getting $39 million. However, it is important that a business owner find a PEG that is aligned with the owner’s vision for the business going forward. It is also important to talk with other companies that a PEG has done business with to verify its track record and ensure that the partnership can be a successful one.
Prior to going through with this type of a sale of a business, it may be worthwhile to talk to an attorney. The documents that are necessary for these transactions are typically very complex, and an attorney can review them to help ensure that they don’t contain any provisions that could prove troublesome after the sale is consummated.