Outside Transfers: Continue

Many owner‐managers of private companies wish to transfer all or part of their business to an outsider, but they plan to continue operating the business for the foreseeable future. There are some owners want to continue to have a financial interest in the business going forward. Frequently they need growth capital but do not want to risk their personal net worth in the process. For the owner to be able to meet these goals, this chapter explains in depth the two primary transfer methods. One is that they can transfer their business to an outside entity that is consolidating similar companies across the industry. Other is that the owners can choose to transfer most of their business to a company controlled by a private equity group, which then funds an aggressive growth plan. This transfer is called recapitalizations. Some of the most successful consolidations involve buying groups of companies in the asset subworld, merging them into an operating company, and selling out to one of the higher‐value worlds. Once critical mass is achieved, the exit can occur in the synergy subworld. Exiting at this level gives the consolidator a slightly higher selling multiple plus a higher synergized benefit stream. This is the logic behind recapitalizations.