Resolving Co-Owner Disputes Maximizes Your Final Sale Price

**Chris Younger** (0:00)
Identify what the potential solutions are, right? Some of the solutions might be one partner buying the other partner out.
Some solutions may be just trying to uncover, hey, what's at the root of the disagreements here? Buyers are gonna see right through any partner conflict, even if you tried to disguise it. And as a result, that's gonna lead to a lower valuation and fewer interested buyers, just because it's very difficult when you layer on family dynamics on top of business dynamics. The odds of that going well are pretty low.

**SPEAKER_2** (0:35)
Welcome to M&A Talk, the number one podcast on all things related to mergers and acquisitions. Brought to you by Morgan & Westfield, a nationwide leader in mergers and acquisitions for small to mid-market companies. We bring you exclusive interviews with industry experts in business sales, valuation, private equity, investment banking and more. It's our mission to provide you with insight and guidance on how to build your company's bottom line and maximize value for eventual sale. Here's your host, Jacob.

**Jacob Oros** (1:08)
This is Jacob Oros, your host and president of Morgan & Westfield, a nationwide M&A firm. And if you're considering selling your company, and if you'd like to work with me throughout the process, you can schedule a free consultation at morganandwestfield.com, and I'll have that link in the show notes. Or if you'd like a free copy of one of my two recent books, The Art of the Exit or Acquired, I'll also have a link to download those in the show notes. And we've also produced a course on Selling a Business, The Art and Science of Selling a Business, and I'll also have that link in the show notes as well. And now onto today's show, we're going to talk with Chris Younger with Class 6 Partners, an investment banker, and we're going to talk about selling your company due to a partner conflict. And Chris, welcome to the show.

**Chris Younger** (2:00)
Thanks so much, Jacob, appreciate it.

**Jacob Oros** (2:02)
Partner conflicts, about as common as relationship issues. How often is an investment banker, how often do you encounter that?

**Chris Younger** (2:11)
Look, whenever you have multiple owners of a business, they're likely going to have different agendas, they're likely going to have different perspectives. And in some regard, that may be why the business has been successful.
That you have this hopefully synergistic combination of different perspectives. And hopefully the partners have good ways to resolve those differences and move forward in unison. But I don't know that I've ever come across a partnership where the partners agreed about everything.
So, it's very common. And in the best partnerships, it's not only common, but it's productive. In the worst partnerships, it's not productive and sometimes damaging to the business. And so, particularly when you get to a sale event, which is highly charged emotionally, and a lot of partners can have different motivations. You might have one partner who is interested in keeping the business. They want to continue to grow, and you have another partner who wants to sell and retire. And sometimes the partner conflicts, if they're not managed appropriately, can lead to that desire to sell, right? Because it's not any fun anymore.

**Jacob Oros** (3:25)
What is your recommendation? And this is a scenario that we encounter a lot, where there's no buy-sell agreement. That's a tough one, because you can't force a sale. How do you usually see those play out, and what's your recommendation to those owners?

**Chris Younger** (3:37)
You know, that's where if the partners are at loggerheads, and particularly if it's a 50-50 partnership, where neither party can force the sale or drive a process, that's when you do want to bring in professional help to try to resolve the conflict. Identify what the potential solutions are, right? Some of the solutions might be one partner buying the other partner out. Some solutions may be just trying to uncover, hey, what's at the root of the disagreements here, and how do we address that, right? So getting some type of counselor, not any different than a marriage, right? And there are folks out there that specialize in that. Or, hey, the solution here is to go find a third party to buy the business such that one or both partners can work towards their retirement. So you have, there's a number of different options that are available, and it really comes down to at some level, how well is the business doing in spite of it?
If there's a lot of partner conflict and the business performance is not going well, your options get a lot more limited. Buyers are going to see right through any partner conflict, even if you tried to disguise it, and as a result, that's going to lead to a lower valuation and fewer interested buyers, just because sophisticated buyers know that if there's been partner conflict, there are probably a lot of things that have been ignored or are going to be diligence issues for them when they get down the road.