A private equity transaction is an avenue for founders to cash out a portion of equity while bringing new financing to the company.
Some founders, rather than selling the company outright in an M&A transaction, may seek the opportunity to partner with private equity (PE) firms. In a typical PE transaction, the PE “sponsor” will offer the founders and other equityholders the opportunity to cash out a certain amount of their equity. The founders will, however, normally retain a substantial equity stake, leaving them with an ongoing incentive to grow the company and the ability to profit further from that growth. The PE sponsor will recapitalize the company with additional equity and debt financing to support growth, with the goal of achieving a profitable exit within a few years’ time.
By “taking money off the table,” the founders can lock in gains on some of their sweat equity, while pursuing new opportunities to build the value of their remaining ownership stakes with the PE partnership and the influx of new financing.
goodcounsel attorneys have significant transactional experience and can effectively support a company that wishes to pursue a private equity transaction. With appropriate waivers, goodcounsel would be able to represent the company’s interests in the transaction and assist management in negotiating new employment and equity arrangements with the PE sponsor.