Planner: Sell to your management team

September 2, 2014 | Last updated on September 2, 2014
2 min read

Here are some ideas and talking points to help you connect the planning dots with your clients. There are three Planners in this series, each outlining different ways a business owner client could transition out of a leadership role and move a company to new ownership.

Sometimes, a group of employees or managers will offer to buy your business. Although both parties have a sense for what the firm is worth, an owner should take a more formal approach and hire an outside advisor to set the value.


  • Proven ability. If you’re considering a sale to your management group, they’ve likely shown they can run the business profitably.
  • Privacy. Not shopping the business publicly means you don’t have to reveal confidential information to potential buyers.
  • Stakeholder comfort. There’s no fear of a new person coming in and cutting costs, firing people, or closing or moving operations.
  • Speed. You don’t have to do the dog-and-pony show, because they players have seen your financials. Plus, you’re only dealing with one party.
  • Price. You’ll get more money up-front than selling to family members.
  • It’s an arm’s-length transaction. Whatever you negotiate generally stands the test of fair market value with Revenue Canada.
  • You can stay involved. You transition out on a pre-determined schedule. This lets you secure $2 million or $3 million for your retirement and continue to work in the business if you want to.


  • You may not get top dollar. Owners usually offer existing employees a break on the price, so this route can eliminate the possibility of finding a buyer who’ll pay a premium.
  • You often retain risk. Managers tend to cobble together financing from a variety of sources, including their own cash, bank financing, or other lenders. And a portion of the purchase price is usually in the form of vendor financing to be paid out over time with interest. Request a letter of confirmation from the lender assuring initial funds will be available by the time the deal closes; take as much security against company assets as possible; and ask for personal guarantees from the employees.
  • Not a clean break. The issue of when you leave remains up in the air, because you still have money in the company. That can be a bit of a problem on both sides, so establish parameters in an employment contract (time frame, roles, and responsibilities), as well as a transition date.