The Edge
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business transition options, continued ...Published: March 01, 2010
• Private equity group recapitalization
For
the owner who wants to retain partial ownership in the business, a
recapitalization transaction with a private equity group (PEG) allows
the owner to sell most of the company, while maintaining partial
ownership. PEGs can provide the business with skilled management,
additional capital and new business connections. PEGs are motivated by
the prospect of increasing the company’s value in a short period of
time. Thus, completing a recap with the right PEG can be a financially
meaningful transition and provide the opportunity to participate in the
future upside of the company.
• Sale to an ESOP
For
owners with businesses that are not in industries that attract
significant investor attention, and who are more interested in
minimizing taxes and providing a benefit to the company’s employees, an
employee stock ownership plan (ESOP) is an option. ESOP transactions
use the company’s future earnings to buy the company to benefit the
employees. While all or part of a company may be sold to an ESOP, many
steps must be undertaken to ensure that the transaction complies with
all required guidelines, as well as government safeguards and
regulations.
• Royalty, joint venture and licensing
For
companies with untapped intellectual property (IP), completing a
royalty or licensing transaction may make sense. A seller can leverage
underutilized IP with a partner’s unique capabilities, while
maintaining ownership of the underlying asset.
Before
committing to a particular transition path, it is important that the
business owner fully understands and gives unbiased consideration to
each potential strategy. Using this approach helps to ensure that
objectives are optimized and the end-result financial gain is maximized.
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| business transition options, continued ...Published: March 01, 2010 |
For the owner who wants to retain partial ownership in the business, a recapitalization transaction with a private equity group (PEG) allows the owner to sell most of the company, while maintaining partial ownership. PEGs can provide the business with skilled management, additional capital and new business connections. PEGs are motivated by the prospect of increasing the company’s value in a short period of time. Thus, completing a recap with the right PEG can be a financially meaningful transition and provide the opportunity to participate in the future upside of the company.
• Sale to an ESOP
For owners with businesses that are not in industries that attract significant investor attention, and who are more interested in minimizing taxes and providing a benefit to the company’s employees, an employee stock ownership plan (ESOP) is an option. ESOP transactions use the company’s future earnings to buy the company to benefit the employees. While all or part of a company may be sold to an ESOP, many steps must be undertaken to ensure that the transaction complies with all required guidelines, as well as government safeguards and regulations.
• Royalty, joint venture and licensing
For companies with untapped intellectual property (IP), completing a royalty or licensing transaction may make sense. A seller can leverage underutilized IP with a partner’s unique capabilities, while maintaining ownership of the underlying asset.
Before committing to a particular transition path, it is important that the business owner fully understands and gives unbiased consideration to each potential strategy. Using this approach helps to ensure that objectives are optimized and the end-result financial gain is maximized.
<<< PREVIOUS PAGE
