Periodically shareholders in privately owned companies need some liquidity. Most often such liquidity does not require the sale of the business. However, as growing companies require capital, in most situations tension can develop between the capital requirements of a growing company and the liquidity needs of its shareholders. Larger private companies typically adopt liquidity plans for shareholders. As companies grow and their capitalization changes, the liquidity plan formulas also need to be adjusted. Liquidity plans can be internally funded from the balance sheet or from free cash flow of a business, or from external debt or equity capital.
Certain BGA Affiliates can assist with the analysis and design of shareholder liquidity plans and, to the extent external funding is required, we can also arrange funding for shareholder liquidity in both the debt or equity capital markets. If external funding is needed, we have researched many funding sources that are supportive of privately owned companies. These include family offices, multi-family offices, private individual investors or foundations, and certain institutional investors.
We also understand the value of nurturing the current owners’ long-term patient capital. Often shareholder relationship building and communication programs are needed to maintain an enthusiastic and positive view of the long-term value of holding shares in a private company. The more that shareholders remain interested in long-term ownership, the lower the current pressure will be on a company’s balance sheet, and credit or cash flow from shareholder liquidity requirements.
Certainly shareholders’ views can also diverge over time with differing views of risk associated with a company’s future prospects for growth or profitability. This is a reason why most shareholder liquidity discussions require a broader perspective on the basis of the Seven Critical Elements™ for Corporate Development and Generational Transition Solutions.
From time-to-time, shareholders decide to sell a business to generate complete liquidity. We can assist with those transactions as well, and have demonstrated in the past an ability to optimize results at those times. This is due to four factors: (i) our long-term involvement with, and intimate understanding of, our clients’ companies, (ii) our experienced senior team members who have helped clients successfully execute many exit transactions, (iii) our thorough understanding of the industry sectors in which our clients’ companies operate, and (iv) our proven ability to reach both strategic and financial buyers globally.
Our experience with Shareholder Liquidity can support your company’s long term success with managing the Seven Critical Elements™ for Corporate Development and Generational Transition Solutions.