Any experience with self funded searches that involve majority purchase

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September 21, 2018

by a searcher from Northwestern University - Kellogg School of Management in Cambridge, MA, USA

vs. 100% purchase of a company? I am contemplating a stock purchase with an owner who will remain a minority partner at 49% of the company. Will be diving into the LOI this week and would love to hear from anyone who has gone the stock purchase route or closed a deal with an owner who stayed on as a minority partner. 

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Reply by an admin
from Stanford University in Honolulu, HI, USA
Hi, Aimee - Here are some interviews that can give you leads to CEOs you can reach out to: David Tze https://www.searchfunder.com/article/viewarticle/1972
Greg Demory: https://www.searchfunder.com/article/viewarticle/1411
Vicente Ariztegui Legorreta: https://www.searchfunder.com/article/viewarticle/1374
Chris Hendriksen: https://www.searchfunder.com/article/viewarticle/1070

Best of Luck, Karen
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Reply by a professional
from William Mitchell College of Law in Minneapolis, MN, USA
From a legal perspective, if you anticipate making all strategic decisions and controlling who holds what offices, you want to ensure the entity's organizational documents are buttoned up to give you that control. You also want clear & binding agreements in place to ensure you control timing of a sale and have drag along rights. These should address the minority's obligation to provide the same reps/warranties and indemnification as you give, an agreement that transaction costs for the sale are covered pro rata, and a waiver of any dissenter's rights under applicable state law.. If the minority holder separately holds real estate or other assets used by the business, those agreements will need to be at arm's length. Obviously, there are other considerations from an operating perspective and I'll let others address those.
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