Take money off the table without giving up the upside
Selling a controlling interest while retaining a minority stake converts most of your paper value into cash and leaves you exposed to what the business does next. It only works in your favor if the retained stake carries real governance terms: tax distributions, information rights, tag-along protection and a defined path to liquidity.
Written and reviewed by Antoine Campbell. Last reviewed .
Owners in their peak earning years often do not want out. They want to stop having their entire net worth inside one operating company while still owning part of the thing they built.
What the structure looks like
A buyer acquires a controlling interest, funded by a mix of debt and equity. You receive cash at closing for the portion sold and units in the acquiring entity for the portion retained. From that point you are a minority owner of a company that carries acquisition debt, which changes the risk profile of what you kept.
Terms to negotiate before you agree to a number
The economics of a minority stake are set by these terms far more than by the percentage. Twenty percent with no distribution policy is worth less than ten percent with one.
- Mandatory tax distributions so you are never taxed on income you did not receive
- Information rights: financial statements on a defined schedule
- Anti-dilution or preemptive rights on new equity issuances
- Tag-along rights so you exit alongside the majority
- A defined buyout on death, disability or a stated number of years
- Limits on related-party transactions and management fees
Understand the leverage you are inheriting
If the acquisition is financed with debt, the business now has a payment it did not have before. In good years, leverage magnifies your retained upside. In a bad year, the debt gets paid before you see a distribution. Ask to see the projected debt service against the trailing twelve month earnings, and ask what happens in a year that comes in twenty percent short.
Where Maurant fits
The Equity Carry Method is built for exactly this: cash at closing plus a carried position with the security choice left to the seller. You choose whether the carried portion is held as a preferred position in the ownership entity or as a note with a subordinate lien. The economics are the same; the protection is yours to pick.
What Maurant needs to evaluate this
- How much cash you need at closing and what it is for
- Three years of tax returns and current financials
- Your tolerance for holding an illiquid minority position
- What role, if any, you want after closing
- Your tax advisor's view of the proposed structure
When Maurant is not the right buyer
- Owners who need full liquidity now
- Businesses whose earnings will not support acquisition debt and a distribution
- Owners who want retained ownership without any governance documentation
Questions owners ask
- How much cash can I actually take out?
- It is set by what the earnings support in debt service plus the buyer's equity, not by the headline valuation.
- Do I still run the company?
- Sometimes, sometimes not. Decide what you want and negotiate it explicitly; do not assume.
- What if the business struggles after closing?
- Your retained equity is behind the debt. That is the risk you are accepting in exchange for the upside, which is why the cash portion matters.
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