The founding partner of a Midwest PR agency retained us to structure a plan for a partner buyout. The minority partner was eager to acquire controlling interest, but did not have the cash to fund the deal. He also was concerned about his own eventual exit, and knew he needed to grow the business in order for the agency to generate adequate cash flow to fund the buyout, remain profitable, and increase the overall value of the firm so that he could receive top dollar down the road when it was time for him to exit.
The TobinLeff Solution
After placing a value on the agency, we structured a tax-favorable buyout plan consisting of a personal loan and a promissory note. Over the next four years, we orchestrated the acquisition of a boutique design firm, adding to the firm’s topline and service offerings, structured an equity-based incentive plan for the agency’s top managers to lock them in—and brought to the client and closed on another acquisition which further enhanced agency profits and revenues while adding senior management talent. The acquisitions and rapid growth created a buzz in the market about the agency, which rebranded to trumpet its new capabilities and services. The founding partner has been long paid off, profits remain high (along with employee bonuses), and the client went from a minority shareholder to a 90% owner of a much larger enterprise.