Structuring seller's continued equity stake + involvement

searcher profile

July 16, 2023

by a searcher from Harvard University - Harvard Business School in New York, NY, USA

I'm considering a digital agency / tech consultancy. For this particular deal, it could make a lot of sense for the founder to retain a minority equity stake in the business and to work out a very long transition where he continues doing a decent amount of work for the firm. One reason: the founder loves the content of the projects, but hates the managing and scaling topics, hence he's selling. Second reason: it's a small consultancy so there are probably a lot of relationships that are tied to him, regardless of how much I try to derisk this topic.

Any advice on how to structure this? I'm guessing a minority equity stake would be in the 10-30% range to make it meaningful and interesting to him while also still be workable for me. If he does have such a stake, should he stay on as a W2 employee? Or could it be on an hourly basis that I could basically charge to the client, since this is a consultancy at the end of the day? Something else?

2
5
136
Replies
5
commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
Happy to discuss options if you like. You can reach me here or directly at redacted We are a Commercial Loan Brokerage Shop with over 500 funding partners and over 50 SBA lending partners. You can reach me here or directly at redacted
commentor profile
Reply by a lender
from California State University, Sacramento in Seattle, WA, USA
OF NOTE: With the latest rumor coming out of the SBA NAGGL conf from last week, the seller would have to GTY your SBA loan if they retain ANY level of ownership. That’s this week’s understanding at least. 😀
commentor profile
+3 more replies.
Join the discussion