Selling a Business

Deciding to Sell and the Alternatives

Treat "sell the company" as one option among eight, price each of them after tax and after obligations, and find out which one actually produces the life you want on the other side.

  • Intermediate
  • 10 min total
  • 12 chapters

What decision this helps you make: Whether to run a sale process at all, and if so, which transaction structure to run, given what you need in cash, what you owe, and what you want to be doing in three years.

What this topic is

A structured comparison of the liquidity routes available to a private business owner: full third-party sale, majority recapitalisation with rollover, minority sale, management buyout, employee stock ownership plan, family transfer, dividend recapitalisation, and deliberately doing nothing. Each is measured on the only basis that matters: after-tax cash at close, cash at risk afterwards, timeline, and what the owner is contractually required to do next.

Why it matters

Owners overwhelmingly compare these options on headline price, which is the one number that is not comparable across them. A strategic buyer paying 8x with a 15% escrow and a two-year earn-out can net less, later, and with more risk than an employee ownership plan at 6x paid partly in a seller note. The comparison only becomes honest once you build the same bridge for each route: enterprise value to equity value to cash at close to cash after tax to cash actually collected.

Who should learn it

Founders and majority owners of privately held companies, family shareholders facing a generational transition, and the advisers who have to lay the options out before a banker is hired.

What you will understand

  • The eight realistic liquidity routes and the mechanism by which each one is funded
  • How to build an after-tax net proceeds bridge that is comparable across structures
  • Why the highest headline multiple frequently is not the best outcome, and what makes it so
  • What to check in your own governing documents before you talk to anyone outside

Prerequisites

Common misconception

"I will sell when I get my number." The number is not a property of the company. It is a property of the buyer, the structure, the tax treatment, and how much of it you are still holding two years after signing. Two offers with identical enterprise values routinely differ by 25% or more in after-tax cash actually received, and the gap is almost never visible on the first page of either letter of intent.