Partial acquisition.
WHAT IT MEANS
Acquiring a share rather than the whole.
WHY PEOPLE DO IT
Lower capital requirement The existing owner remains, with their knowledge and relationships A route to full ownership over time
WHAT IT RISKS
Being a minority owner with little influence Disagreement with a partner you cannot remove Difficulty exiting
WHY MINORITY POSITIONS DESERVE CAUTION
Without control, you depend entirely on the majority owner's decisions.
WHAT TO ESTABLISH
What rights your shareholding actually carries.
WHAT TO AGREE IN WRITING BEFORE INVESTING
Decision making: what requires your agreement
Profit distribution Your role and remuneration What happens if either party wants to exit How the business is valued on exit What happens on disagreement, incapacity or death Restrictions on transferring shares
WHY EXIT PROVISIONS MATTER MOST
A minority share in a private business is otherwise unsellable.
WHAT TO ESTABLISH
A mechanism to exit at a determinable value.
WHAT TO ADDRESS
Deadlock, where ownership is equal.
WHY EQUAL OWNERSHIP IS DANGEROUS
Disagreement paralyses the business with no resolution.
WHAT TO ESTABLISH
A mechanism for breaking it.
WHAT TO VERIFY BEFORE INVESTING
The same due diligence as a full purchase.
WHY
You are exposed to the same problems with less control.
WHAT TO ESTABLISH ABOUT THE OTHER OWNER
Their intentions, finances and reliability.
WHY
You are choosing a partner as much as an investment.
WHAT TO OBTAIN
A properly drafted shareholders agreement.
