A significant percentage of business owners have their net worth
tied up in their company. While many of these owners have a need to
create liquidity, they often prefer not to sell their business
outright. There are many reasons an owner might seek liquidity from
their business without having a desire to sell 100% of it,
including diversification of wealth, family obligations, lifestyle
decisions, estate planning considerations, succession of
generational ownership while keeping an interest in the family,
etc. Seeking out a third party investor is one way to achieve
partial liquidity for these business owners, while also providing a
potential upside for the future.
In these situations, private equity firms (PE firms) can make
for good partners. Many PE firms have a preference for the business
owner to retain a residual equity interest in the business. They
believe the selling shareholders can play a critical role in the
day-to-day management of the business and in
