When considering selling or transferring a business, the options available to the owner(s) typically fall into the following categories:
| INSIDE | OUTSIDE |
| Intergenerational Transfer | Sale to a Third Party |
| Management Buyout (MBO) | Recapitalization |
| Sale to Existing Partners | Orderly Liquidation |
| Sale to Employees | Public Offering |
Intergenerational Transfer
Transfer of business stock to direct heirs, usually children. 50% of business owners want to exercise this option – in reality, only about 30% actually do so.
Management Buyout (MBO)
Owner sells all or part of the business to the company’s management team. Management uses the assets of the business to finance a significant portion of the purchase price.
Sale to Existing Partner
Success is closely linked to the existence and quality of a buy-sell agreement. Not available to single-owner businesses.
Sale to Employees
Company uses borrowed funds to acquire shares from the owner and contributes the shares to a trust on behalf of the employees.
Sale to a Third Party
Owner sells the business to a strategic buyer, financial buyer, or private equity group through a negotiated sale, controlled auction, or unsolicited offer.
Recapitalization
Finding new ways to “fund the company’s balance sheet.” Essentially brings in a lender or equity investor to act as a partner in the business. Can sell minority or majority position.
Orderly Liquidation
The business is shut down through a simple, quick process. Makes sense if asset values exceed the ability of the business to produce income required to support an investment.
Public Offering
Most small businesses do not have access to public offerings. One possibility is for a small business to join with other similar or synergistic companies and go to the public offering together. Another approach would be to complete a Reverse Merger.