Partial buyout, minority stake valuation and funding structure

September 11, 2023
by a searcher from Harvard University in Boston, MA, USA
Hi everyone,
In my business acquisition search I came across an opportunity where an owner is looking to maintain majority control but sees the value of bringing in an additional partner.
I was wondering if anyone had any experience with buying a minority stake in an existing business - we loosely discussed a rough 3x valuation (I'm estimating the business would sell between 3-4x normally) but I'm also going to have to work on the business, although not full time (current EBITDA is roughly 600k, was planning on buying 30-49%).
I was wondering if anyone had any experience with a minority partial buyout w/o a change of control, and how that impacts the valuation - I'd also want to fund the partial buyout with debt- obviously SBA is off the table so I'm wondering if anyone has experience with financing options as well.
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
from The University of Chicago in Chicago, IL, USA
2. Option: Buy the whole company for $D + $E. Seller keeps X%, yours is Y%(=100-X). Seller comes with X% of $E. This way debt will go on the company books and can be serviced. You will have to work out PG. Essentially, seller will get lot more $ then as proposed by you. This should help you convince him.
3. Negotiate rights for you to buy Seller's X% in increments or all at one time. Better yet, negotiate that the Company buys portion of X shares every year or as you wish. Some tax benefits of doing this way. Eventually company only has Y shares, all owned by you.
4. Negotiate no minority discount and no majority premium. Also, how to value each year.
5. Make sure valuation and financials reflect your salary.
Have been involved with such structures before.