XYZ Limited

XYZ Limited

Two founders own 50% each. Lucy is in mid-50’s and looking towards exit. Cath is in her mid-40’s and happy to stay in. Previously sold a 50% stake to another company in the same/complimentary market. Didn’t work out so bought back the shareholding.

 

Subsequently identified two senior managers who could step up to director/owner role over time. Each founder sold down 5% to senior managers. In this case (a) freed up tax free capital (b) small reduction in cashflow and (c) no dilution of control.

Lucy plans to sell down progressively over next few years and reduce day-to-day involvement. Cath will retain 45%. Trade buyer is most likely purchaser (and much greater sale price achievable for all). 

 

Business has systemised most of it’s processes so future business success is not dependent on founders.

 

Structure Design

Structure Design

Roger founded company and owned 100% for 15+ years. Business grew to 15 people. Roger in early 60’s – needed a succession plan and way to ensure continuity of business. Did two things: Sold 15% of the shares to up and coming manager in his late 30’s (and vendor financed the purchase price) and acquired a smaller business of complementary practice from owner in his late 40’s using shares (and sold some more shares to vendor). Outcome: Roger now owns 60% of a bigger company, received cash for 25% and has two new managers/directors to share the load with. Retained 60% of shares (capital) and income (cashflow), agreed to share control with new directors. Enlarged scale of business should increase profitability (economies of scale). Business is in the professional services (engineering consultancy) but has a brand value beyond skills of founder.

HC Builders

HC Builders

Vendor getting toward retirement. Purchaser needed plumbing business to add onto drain laying company. Asset sale of 100% of business. Vendor got to keep his job (on the tools), relinquished management responsibility for up to 9 staff and purchase price consisted of fixed price plus earn out. Vendor has stayed on after earn out finished. Role is to mentor next generation of plumbers, train apprentices and ensure skills embedded in purchaser organisation.

Digital Space Ltd

Digital Space Ltd

Our client

  • bought out fellow 50% shareholder when that relationship broke down (for $140k) and

  • brought in new potential investor ?on trial? for one year. Provided that new investor met specific financial KPI’S (linked to his sales) our client granted him a put option to buy 50% of shares at a pre-agreed price (i.e. calculated before the increased sales – $1.2m). Pre-agreed shareholders agreement terms. If new investor doesn?t like it, he can walk away. If he does like the business and he is performing, he effectively gets to buy at a discounted price.

Our client

  1. shares control (but only after 1 year);
  2. takes some capital off the table (about 3 x NPAT);
  3. retains 50% of an enlarged cashflow and his job. Business value depends on strength of personal relationships so succession planning essential.