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Commercial Banking > Business Succession > Consider Your Exit Options > Sell to a Partner or Your Employees

Sell to Partners or Your Employees

Selling your business to your partners or management can be an attractive option to consider. Current employees know the business and have a vested interest in seeing it prosper. As well, customers, suppliers and investors may be reassured by the stability this option offers.

Advantages

  • The management team knows the business environment, its customers and the industry
  • The sale transition time may be compressed as the management team already understands the core business
  • By selling to management, you avoid a steady stream of potential third-party buyers touring the facilities and reviewing records
  • There will be little disruption to the day-to-day operations
  • Confidential information is not released
  • Management may become more concerned with profitability
 

Some Questions To Consider

  • Which employees or business partners would be best suited to purchasing your interests?
  • Do the purchasers have access to sufficient funds to buy you out entirely or will you have to finance part of the purchase price?
  • Do employees have the vision and management capability to assume an ownership role through the transition period and run the business profitably long term?
  • Is your management team prepared to assume the risk of ownership?
  • Can the business take on additional debt to support the management in financing the acquisition?
  • If you have to finance part or the entire purchase price, can the purchaser profitably run the business to ensure your repayment?
  • Will the purchase price be paid from future profits or employees’ own capital?
  • Are employees able to provide personal indemnities and assume successor obligations?
 

A Management Team Can Help

Working closely with your management team to develop a transition plan will help ensure a smooth exit and minimize disruption to business operations and employee performance.

If your company does not have a management team positioned to take over the company, consider bringing in a new partner or an outside senior executive who can eventually buy your interests. Over time, you would be able to turn over control and transition the business ownership gradually.