Selling Your Company Twice to Maximize Financial Gains
- Waypoint Private Capital
- Jun 2
- 5 min read
How Selling Your Company to Private Equity Gives Business Owners a "Second Bite at the Apple"
Did you know that you can sell your company twice? And that by selling it twice you can realize a much higher combined sale price than you can by selling it just once?
There are many options for exiting your business, including a sale to a strategic buyer, sale to a financial buyer, management buyout, ESOP, and sale or gift to a family member (all of which we explore in further detail in this article), but only one of those options allows you to sell your company twice.
In this article, we will explain the benefits of selling your company to a private equity firm (i.e., a financial buyer) because it offers some great benefits that aren’t possible through other sale alternatives.
When private equity firms buy companies, they will usually only offer to buy 70-80% of the company, asking the seller to maintain a 20-30% equity position in the company. This is often referred to as “rolling your equity.” They do this to make sure the seller still has “skin in the game” and has incentive to continue running and growing the company after the sale. The private equity firm will then help the owner grow the company and make other value-enhancing changes (e.g., bolstering the management team) over the next three to five years before selling it again for what they hope is a much higher valuation. When the private equity firm sells the company, the original business owner gets to sell their remaining 20-30% equity position. This is their second bite at the apple, and how they sell their company twice.
Before continuing, it might help to understand how the team at private equity firms earns their money so you can see that their interests are aligned with yours. They have raised money from outside investors such as pension funds, insurance companies, and high net worth individuals. They invest that money by buying companies, growing them, then selling them again. The team at the private equity firm is rewarded for their success by getting a 20% share in the profits they generate from their investments.
For example, if they have a $300 million dollar fund that they invest, and over the next seven years they grow that $300 million to $800 million, they have generated a profit for their investors of $500 million. The team at the private equity firm will then keep 20% of the $500 million, or $100 million, and return remaining $700 million to their investors. As you can see, they are handsomely rewarded for their efforts.
But why does this matter to business owners who are selling their company?
Business owners should care about this because their interests are completely aligned with those of the private equity firm. Private equity firms are great at growing businesses and increasing the value of those businesses. That is their entire mandate, the reason they bought your business, and how they make money. By partnering with private equity firm buyers, business owners can realize significant upside on their rolled equity.
The Power of the Second Business Sale
Hypothetical Example
Consider Robert, the owner of a manufacturing company generating $5 million in annual EBITDA. After building his business for 25 years he wants to take some chips off the table and guarantee his financial security, but he still believes in the company's growth potential.
After going through a professional sale process Robert and his investment banker negotiate a sale to a private equity firm. The private equity firm values Robert's company at $35 million (a 7x EBITDA multiple) and offers to purchase 75% of his company for $26.25 million, leaving Robert with a 25% stake worth $8.75 million.
During the next five years, the private equity firm helps Robert implement several value-creation initiatives:
Expanding into new geographic markets
Making two strategic acquisitions
Improving operational efficiencies
Strengthening the management team
As a result, the company's EBITDA triples to $15 million. When the business is sold again five years later, the improved performance and stronger positioning attract a higher multiple of 9x EBITDA, resulting in a $135 million valuation.
Robert's 25% stake is now worth $33.75 million—significantly more than his initial $26.25 million payout, despite having already cashed out most of his ownership.
In total, Robert will have received $60.0 million for a business originally valued at $35 million.
Why This Strategy Works for Business Owners
This "two-bite" approach offers several key advantages:
Achieve immediate liquidity and wealth diversification. The initial sale allows you to take chips off the table, reducing your financial concentration in a single asset.
Gain a sophisticated growth partner. Private equity firms have extensive resources and expertise to help scale your business in ways that might not be possible on your own. Instead of cutting costs and firing employees, which is a common myth about private equity firms, they usually invest in growth initiative and expand the employees base to help grow the business.
Perhaps the most compelling is the potential for your minority stake to appreciate significantly. In many cases, this "second bite of the apple" can be equal to or greater than the initial sale proceeds—effectively allowing you to sell your company twice.
Is This the Right Move for You?
This strategy is particularly well-suited for:
Business owners who want to maximize their total exit value but aren't in a rush to completely walk away.
Entrepreneurs who believe their company has substantial growth potential but needs additional resources or expertise to achieve that growth.
Founders looking to de-risk their personal finances while still participating in future upside.
Those who want a strategic partner rather than simply a buyer.
Next Steps to Selling Your Company Twice
If the prospect of "selling your company twice" sounds appealing, it's worth exploring this opportunity with experienced advisors who understand the private equity landscape.
The team at Waypoint Private Capital has helped many business owners sell their company to private equity buyers and get two bites at the apple. We’ll help you prepare for the sale, find a group of private equity investors that are interested in buying your business, then negotiate and close a sale with the buyer who is the best fit for you and your business.
If you're thinking about selling your company, consider how you might be able to sell it twice—and potentially double your sale price in the process.
About Waypoint Private Capital
Waypoint Private Capital is an investment banking firm that advises the owners and management teams of middle-market companies through critical stages of their business' life cycle. Waypoint helps business owners sell companies, buy companies, raise equity and debt capital for growth and recapitalization, and plan for a successful exit from their business.
To learn more visit waypointprivatecapital.com or call us at 608.515.3354 or 918.633.2647 and speak with a Waypoint Private Capital expert.
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