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Redtail Capital - Unlocking Business Value

 

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Sale

Family Transfer

Leveraged Buy Out (LBO)

Management Buy Out (MBO)

Employee Stock Ownership
Plan (ESOP)

Private Equity Recapitalization

Gift or Charity 

Public Offering

Liquidation

Intergenerational Transfer

You may believe that you are going to hand your business down to the next generation. While this is an admirable goal and can be an optimal exit strategy, there are several factors to consider.

First of all, talk with your children or family members that you have in mind for taking on this responsibility. Don't force it on them! This can be one of the most critical mistakes you can make. If they are reluctant or do not show enthusiasm, you will want to carefully reconsider this choice.

Also, even if they really want to take over the business, are they qualified? Do they have what it takes to make the critical decisions? Do not wait until you are ready to exit the business to find out. Begin working closely with your chosen replacements and observe them carefully.

If you do decide to transfer the business internally, how will you get paid? This is a frequent stumbling block. You may be willing to finance part of the transaction, but you will most likely be looking for some cash at exit. In this case, we may need to consider funding options that will allow you to take some money off the table. For example, a TIGRcub structure may be ideal.

How will this transfer be valued? Internal transfers are usually made at fair market value - the price an unmotivated seller may receive from an unmotivated buyer. This is usually lower than a price that you can get from a motivated third party.

You will need to weigh all of these factors and more as you consider a transfer within your family.