Selling a Minority Stake First, Keeping Control of the Rest
A question comes up in roughly one out of three first conversations with an owner, almost always phrased the same way: do you really have to sell everything in one go? There is another path, selling 20 to 40% of the capital first, keeping the majority, and selling the rest later. It is not a cautious half measure. It is a structure with its own rules, and I too often see owners step into it believing they keep all the freedom they had before.
The appeal is easy to understand, and I feel it too when an owner first describes it to me. The buyer, often a financial investor or a family office, comes into the capital without taking over management. They watch the company from the inside, test their assumptions about the quality of the leadership team and the strength of the margins, before committing to the rest. The owner, for their part, books a first payout without leaving the desk, gets to see how the new shareholder actually behaves before handing over the keys, and keeps, on paper, the majority of the votes. Seen from that first conversation, it all looks like a gentler version of an ordinary sale.
What I see once the shareholders' agreement lands on the table is that a majority stake guarantees almost nothing about how the company is actually run. An agreement drafted under the pressure of closing the first tranche almost always hands the minority shareholder a list of reserved matters, annual budget, hires at leadership level, investments above a certain threshold, that turns a 65% majority into something close to a partnership of equals. The owner then discovers that they did not sell a slice of the company. They took on a partner with veto rights over everything that matters.
The other point that keeps coming back across mandates is the price of the second tranche. It is rarely fixed when the first one is signed, and for good reason: nobody wants to freeze today the value of a company that will only change hands in three or five years. The trouble is that the formula meant to recalculate that price, most often an average EBITDA multiple over recent years, gets negotiated while both sides still share the same interests. Three years later that is no longer true at all. The minority shareholder, a majority owner in waiting, has every incentive to see results soften in the year before the purchase option comes due. The owner, still running the company at that point, ends up defending a performance that directly determines what they will be paid for the remaining shares.
The buyer's profile also changes the nature of the whole arrangement, and I rarely say this upfront to owners who arrive with the idea already formed. A financial investor or a family office entering as a minority shareholder thinks in terms of an exit horizon and negotiates every governance clause with that in mind. A leadership team buying 30% with a full buyout planned later, a management buyout in two steps, in effect, brings real operational continuity, but rarely the equity needed to fund the second tranche without a fresh round of debt. The owner, meanwhile, tends to hear the same generic promise of a gentle transition, whoever is sitting across the table.
What holds up, in the mandates where this structure delivers on its promise, comes down to three things put in writing before the two sides' interests start to diverge: a pricing formula for the second tranche, a list of reserved matters narrow enough to protect the minority holder without handing over everything a cautious lawyer might ask for, and an exit timeline fixed from the start. Without those three, a two-step sale does not postpone the difficulty of letting go of the company. It simply spreads it over several years, with a partner instead of a buyer.