Cash-out transactions

Frequently in the development cycle of a privately owned business, its founder shareholders find themselves in a position where they wish to de-risk by realizing some of their value, whilst at the same time they are not attracted to an outright sale.

Equally, non-shareholding members of a secondary management team who have built a close working relationship with the founder shareholders can find themselves in a position where they feel ready to take on the risks and rewards of equity ownership, but at the same time not ready to replace completely the role of the founder shareholders by way of an outright management buy-out.

In these circumstances, we have become expert at structuring transactions that facilitate a phased ‘handover’ of the equity ownership.  These transactions allow the founder shareholders to realize a proportion of their existing investment whilst retaining a share in the future growth in value of the business. 

Funding for transactions of this nature may come from debt facilities and / or from a private equity investment, in addition to the rollover of value from the founder shareholders. 

Our skill is in designing deal structures that optimize the future returns for both the old and new management shareholders, whilst also ensuring an appropriate financial structure for the business’s growth plans.

In summary, cash-out transactions allow shareholders to:
diversify their wealth
retain a shareholding and influence in their business
resolve succession issues
groom the business for their final exit – either by sale to a third party or the management team or flotation
provide equity incentives for secondary management teams (or indeed for members of that team not yet identified)
provide access to additional capital if required to maximize the business’s growth plans

If you would like to discuss cash-out transactions in more detail please call one of the team.