Overview: How to Choose the Right Path

  • Selling a company isn’t one-size-fits-all—match the option to value, timing, people, and legacy.
     
  • Key filters: cash at close, tax profile, leadership bench strength, business defensibility, and post-close involvement.
     
  • Below is a plain-English snapshot of each option: timelines, ideal owner fit, and core tradeoffs.
     

Third-Party Sale (Strategic or Financial Buyer)

  • Best for: Owners seeking maximum liquidity and a clean transition.
     
  • How it works: Full stock or asset sale; working-capital target; standard reps & warranties.
     
  • When it excels: Recurring revenue, low customer concentration, scalable systems; strategics may pay for synergies.
     
  • Timeline: ~6–9 months (marketing + diligence after LOI).
     
  • Tradeoffs: Heavier diligence, possible transition/employment agreements, culture/integration risk.
     

Private Equity Recapitalization (PE Recap)

  • Best for: De-risk now, keep meaningful upside (“second bite”).
     
  • How it works: PE takes control; founder rolls equity; run a value-creation playbook.
     
  • When it excels: Strong leadership layer, clear growth levers, comfort with board oversight.
     
  • Timeline: ~6–9 months (similar to a sale).
     
  • Tradeoffs: Shared control and governance; great if you want partners/capital—not if you need total autonomy.
     

ESOP (Employee Stock Ownership Plan)

  • Best for: Legacy, culture, tax efficiency, and keeping the company independent.
     
  • How it works: ESOP trust buys shares for employees; financed by bank debt + seller notes; repaid from profits.
     
  • When it excels: Stable cash flow, robust payroll, team ready to run without the founder.
     
  • Timeline: ~9–12 months (feasibility, trustee, valuation, financing).
     
  • Tradeoffs: Ongoing admin and company debt load; requires disciplined, forward-looking management.
     

Management Buyout (MBO)

  • Best for: Continuity with the current team and a phased owner exit.
     
  • How it works: Managers purchase via SBA/conventional loans, seller financing, and/or minority investors.
     
  • When it excels: Predictable cash flow and funded management appetite.
     
  • Timeline: ~6–18 months depending on financing and readiness.
     
  • Tradeoffs: Internal teams rarely pay top market price; you may carry a note or accept an earn-out.
     

Merger (with a Peer or Platform)

  • Best for: Owners energized by scale and synergy creation vs. a full exit.
     
  • How it works: Combine for cash + equity or a true co-governed entity; unlock cross-sell, geography, shared overhead.
     
  • When it excels: Complementary capabilities and limited customer overlap.
     
  • Timeline: ~6–12 months (integration planning = critical path).
     
  • Tradeoffs: Shared control, culture fit risk, and integration complexity.
     

How to Decide (and Prepare)

  • Clarify goals: Cash now vs. future upside, control vs. independence, culture vs. scale.
     
  • Start early: 12–24 months ahead to tune value drivers, clean financials, and reduce owner dependence.
     
  • Plan life after exit: Define your role post-close to negotiate from strength.
     
  • Model outcomes: Compare after-tax proceeds and structures across options.
     

Get Expert Help (and Real Numbers)

  • Exit Factor delivers a Valuation Readiness Review, side-by-side after-tax proceeds models, and a mapped buyer universe (strategics, PE, family offices).
     
  • We coordinate ESOP feasibility, structure MBOs/mergers, and run your go-to-market, data room, and diligence—so value survives to close.
     

Not sure which path fits your number, your team, and your legacy?
Book a quick consult—Exit Factor will guide your exit with clarity and confidence.