Sale of Family-Owned Business to Private Equity Investor
Our client is a leading supplier of temporary legal staffing services to law firms and corporate legal departments. A second-generation family business owned by several siblings, the patriarch and founder of the family business and current CEO of the business desired to liquidate the great majority of the family’s investment and begin to transition away from active management of the business.
Working with the client’s suitor, a private equity firm, we negotiated for the sale of approximately 90% of the family’s stake with a retained equity portion of 10% for the CEO. In negotiating the transaction, we addressed a variety of issues, including optimal tax structure, consent and governance rights for the CEO’s retained equity and incentive issues for the employees of the business. The family was extraordinarily generous in sharing the benefits of the transaction with a number of key employees and various issues needed to be resolved with the private equity buyer which wanted to skew the benefits afforded the key employees more in the nature of future incentives to keep them motivated and working for the buyer’s benefit.
In representing the client, Tannenbaum Helpern also had to help the owners to work through their own family and business issues resulting from the changed roles of the CEO and his father, who founded the business. The transaction also highlighted the importance of the treatment of long-term key employees to family businesses.