Entering into a Partnership with a seller

June 06, 2024

by a professional from Indian Institute of Technology, Delhi in Atlanta, GA, USA

Is anyone aware of a successful partnership deal structure in the ETA space? I am curious to know what the investor repayment terms will be like.

In a conventional acquisition, the searcher pays monthly debt and does not take out any distribution until the investor capital is paid back. Does anyone have a perspective on how would this be like with a seller who will continue to remain active in the business?

Does entering into a partnership even make sense using the LBO model?

Reply by a searcher
in Burlington, ON, Canada

I know individuals that have bought businesses with the previous ownership remaining a minority equity or in another case###-###-#### partnership. Both times, it has been successful. The way they structured it is the buyer purchases 100% of the corporation with a buy in option for the seller up to XX percentage at the same terms. This allows the seller to essentially cash out a large portion of value of the deal for themselves, while then buying in and retaining equity. Now as partners under the same terms they share the debt load and business financing.

Reply by a searcher
from Georgia Institute of Technology in Atlanta, GA, USA

You'd do a stock transaction instead of asset transaction. For paying for the stock, you could do profit sharing, deferred payment, or a combo of both.

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