Buying Out a Business Partner or Shareholder: Structuring and Financing the Deal When an entrepreneur starts a new business, planning for a buyout of a business partner years in the future is rarely a top priority- but maybe it should be. As businesses grow and evolve, so too do ownership or shareholder groups. The same partners or investors who took a company from startup to $20 million in revenues aren’t necessarily the right people to grow the company from $20 to $50 million, or $50 to $150 million, and so on. Layer in retirements, partnership disputes and absentee or non-strategic owners receiving generous compensation, and making changes in ownership becomes increasingly more important (and costly) as the business grows. On the next few pages, we’ll discuss: 1. When a Partner Buyout is a Solution 2. Valuing the Business 3. Structuring a Partner Buyout 4. Financing a Partner Buyout 5. Questions a Business Owner Should Ask When Raising Capital 6. Using an Investment Banker to Raise Capital for the Buyout About Access Capital Partners: Access Capital Partners is a middle market investment bank that provides strategic advisory services, raises capital for companies (growth, refinancing, restructuring, acquisitions, partner buyouts, management buyouts, leveraged buyouts), and helps business owners sell or recapitalization their companies. We are shareholder centric and have deep experience in the middle market. With over 100 transactions representing over $8 billion in volume, business owners leverage our experience as they navigate through inflection points and ultimately achieve personal liquidity.

1. CAPITAL RAISING | MERGERS & ACQUISITIONS | STRATEGIC ADVISORY
Structuring and Financing a
Partner Buyout
A Resource for Middle Market Business Owners
and Their Advisors

2. Structuring and Financing a Partner Buyout | 2
Buying Out a Business Partner or Shareholder
• When an entrepreneur starts a new business, planning for a buyout of a business partner
years in the future is rarely a top priority- but maybe it should be.
• As businesses grow and evolve, so too do ownership or shareholder groups. The same
partners or investors who took a company from startup to $20 million in revenues aren’t
necessarily the right people to grow the company from $20 to $50 million, or $50 to $150
million, and so on.
• Layer in retirements, partnership disputes and absentee or non-strategic owners receiving
generous compensation, and making changes in ownership becomes increasingly more
important (and costly) as the business grows.
On the next few pages, we’ll discuss:
1. When a Partner Buyout is a Solution
2. Valuing the Business
3. Structuring a Partner Buyout
4. Financing a Partner Buyout
5. Questions a Business Owner Should Consider When Raising Capital
6. Using an Investment Banker to Raise Capital for the Buyout
Strategic Advisory | Capital Raising | Mergers & Acquisitions

3. Structuring and Financing a Partner Buyout | 3
1. When a Partner Buyout is a Solution
Shareholder retirement
Provides liquidity for a shareholder who is ready to step away from the
business to focus on family, friends or health issues.
Perceived disparity
between contribution
and reward
Limits future upside for non-contributing equity partners such as: absentee
owners, family members who aren’t involved in the business and non-strategic
financial partners.
Partner disputes
Allows buying shareholders the opportunity to move beyond competing visions
for the company, personal differences or misaligned interests, to focus on the
future
Disability or illness of
partner
Provides liquidity for a partner who is no longer able to run the business
Ownership Structure
Cleanup
Removing non-essential minority owners can streamline the process for making
major decisions or clear the way for new strategic financial partners.
Shareholder in need of
partial or total liquidity
Provides liquidity for retirement, other business ventures, major personal
purchases, divorce settlements or other large expenses
Strategic Advisory | Capital Raising | Mergers & Acquisitions

4. Structuring and Financing a Partner Buyout | 4
2. Valuing the Business
• If you’ve incorporated a buy-sell agreement into your business’
partnership documents, there may already be a fairly straight-
forward formula or process that divides business assets or values
the business.
• If not, the process can become fairly complex and the use of a
business valuation expert or investment banker is recommended
to help you determine what your company is worth.
To learn more about valuing a business or to discuss the value of your business, please contact
Access Capital Partners directly or visit www.accesscappartners.com.
314.783.9550
info@accesscappartners.com
Strategic Advisory | Capital Raising | Mergers & Acquisitions

5. Structuring and Financing a Partner Buyout | 5
3. Structuring the Partner Buyout
While each situation is unique and there are many ways to structure the buyout of
a business partner, here are the most common structures:
Common Partnership
Buyout Structures Typically Used When
Pros for Remaining
Shareholder(s)
Cons for Remaining
Shareholder(s)
§ Seller note only § Limited options exist for
raising external debt or equity
§ Partner doesn’t need total
liquidity at once
§ Business can’t afford a large
lump-sum cash outflow
+ Avoids taking on external
debt or equity
+ Minimizes cash coming
out of the company to pay
former partner
- Payments are fixed and often
not tied to performance of
the company
- Seller becomes a creditor of
the company and receives
preference in a liquidation to
equity holders
§ Cash payment,
plus
§ Seller Note
§ Seller requires some liquidity
now, but will agree to take
some value over time
§ Business can’t afford a large
lump-sum cash outflow
+ Avoids making one large
lump sum payment
+ Seller Note reduces the
amount of external capital
that needs to be raised
- Requires some cash upfront
- Seller becomes a creditor of
the company and receives
preference in a liquidation to
equity holders
(continued on next page)
Strategic Advisory | Capital Raising | Mergers & Acquisitions

6. Structuring and Financing a Partner Buyout | 6
3. Structuring the Partner Buyout (continued)
Common Partnership
Buyout Structures Typically Used When
Pros for Remaining
Shareholder(s)
Cons for Remaining
Shareholder(s)
§ Cash payment,
plus
§ Earnout1
§ Seller requires some liquidity
now, but will agree to take
some value over time
§ Differences in valuation based
on expected future
performance exist between
buyer and seller
+ Avoids making one large
lump sum payment
+ Can tie payment of the
earnout to future company
performance
+ Aligns company and
seller’s interests
- Requires some cash upfront
- Must be prepared to make
contingent earnout payments
§ Cash payment,
plus
§ Seller note, plus
§ Earnout1
§ Seller requires some liquidity
now, but will agree to take
some value over time and
some value based on future
company performance
§ Differences in valuation exist
between buyer and seller
+ Reduces the amount of
external capital needed
+ Can tie payment of the
earnout to future company
performance
+ Aligns buyer and seller
interests
- Requires some cash upfront
- Seller becomes a creditor of
the company and receives
preference in a liquidation to
equity holders
- Must be prepared to make
contingent earnout payments
§ Lump sum cash
payment
§ Severing ties with the selling
shareholder is important for
personal or operational
reasons
§ There is no strategic risk to
removing the shareholder in
the near term
+ Selling shareholder is
removed entirely
+ No future obligation to
shareholder for value
created after the sale
- Requires access to largest
amount of capital
- Depending on the situation,
large cash outlay can strain
the business
1) An Earnout is a future payment or series of payments made to the former shareholder, usually tied to business performance metrics, such
as revenue, EBITDA, customer retention or earnings.
Strategic Advisory | Capital Raising | Mergers & Acquisitions

7. Structuring and Financing a Partner Buyout | 7
4. Financing the Partner Buyout
Financing options for a partner buyout are based on the
profile of the business itself, namely:
• The size of the company (revenue and EBITDA);
• Historic and expected future performance;
• Cash flow profile;
• Asset composition;
• Customer dynamics; and
• Industry segment.
Strategic Advisory | Capital Raising | Mergers & Acquisitions

8. Business Profile
Revenues $5 to $10 million $10 to $30 million $30 to $200 million
EBITDA $0 to $2 million $2 to $7 million $7 to 20+ million
Growth Trajectory Stable to growing Stable to growing Stable to growing
Funding Options
Asset Based
Debt Financing
Options
§ Banks
§ SBA lenders
§ Non-bank, asset based
lenders
§ Many bank and non-bank
financing options
§ Many bank and non-bank
financing options
Cash Flow Debt
Financing Options
§ Limited bank options
§ Some SBA lenders
§ Some revenue or royalty
financing options
§ Some bank options for
senior debt without tangible
collateral
§ Many non-bank alternatives
for senior term loans,
mezzanine loans, unitranche
facilities
§ Many bank options for
senior loans
§ Abundant non-bank
alternatives for senior cash
flow loans, 2nd lien loans,
mezzanine loans,
unitranche facilities
Equity Financing
Options
§ Friends and family
§ VC funds (industry and
growth profile specific)
§ Limited institutional private
equity options
§ Later stage VC firms
(industry and growth profile
specific)
§ Growth equity investors
§ Family offices
§ SBICs and traditional private
equity firms
§ Growth equity firms
§ Family offices
§ SBICs and traditional
private equity firms
Structuring and Financing a Partner Buyout | 8
4. Financing the Partner Buyout (continued)
Strategic Advisory | Capital Raising | Mergers & Acquisitions

9. Structuring and Financing a Partner Buyout | 9
4. Financing the Partner Buyout (continued)
• To discuss a particular financing need, partner buyout or restructuring situation,
or just to gather information about the current state of the funding market,
including, pricing, structure and availability of middle market debt and equity
financing, please contact Access Capital Partners.
• You do not need an imminent or market ready deal to call us. We strive to be a
resource.
314.783.9550
info@accesscappartners.com
Strategic Advisory | Capital Raising | Mergers & Acquisitions

10. Structuring and Financing a Partner Buyout | 10
5. Questions a Business Owner Should Think About
• Capital options for well performing companies have
become diverse, more complex and are growing each year
• The next couple pages cover a range of questions that a
business owner should think about related to raising capital
for a partner buyout
Strategic Advisory | Capital Raising | Mergers & Acquisitions

11. Structuring and Financing a Partner Buyout | 11
5. Questions a Business Owner Should Think About
If Raising Debt
• Is debt available for my company?
• Am I comfortable taking on debt to finance a partner buyout?
• How much debt can my business comfortably support? Is that enough
for the whole buyout?
• How much debt will new lenders provide?
• How much will the debt cost?
• What’s the best way to structure the new debt to minimize cost and
maximize flexibility?
• Who are the best debt providers for a business of my size, in my
industry, in my situation?
Strategic Advisory | Capital Raising | Mergers & Acquisitions

12. Structuring and Financing a Partner Buyout | 12
5. Questions a Business Owner Should Think About
If Raising Equity
• Is raising equity a viable funding option?
• Am I comfortable bringing on an equity partner to finance a partner
buyout?
• How much ownership dilution is acceptable?
• What’s my business worth to a new equity investor?
• Am I looking for an active or passive investor?
• What rights or requirements will the new investor have?
• When will this investor require its money back?
• Who are the best equity investors for my business?
• Which investors have invested in companies like mine?
• Does the equity investor add any strategic value beyond capital
(customers, strategic guidance, other partners, etc.)?
Strategic Advisory | Capital Raising | Mergers & Acquisitions

13. Structuring and Financing a Partner Buyout | 13
6. Using an Investment Banker to Raise Capital
• Raising capital often inadvertently becomes a second job for many
executives, particularly for those who haven’t been through an
ownership-change related financing or a financing involving a capital
provider other than a bank lender.
• When time is at a premium, or a business owner wants an expert to
manage the process, they can hire an investment banker who
specializes in raising capital.
Strategic Advisory | Capital Raising | Mergers & Acquisitions

14. Structuring and Financing a Partner Buyout | 14
6. Using an Investment Banker to Raise Capital
How Investment Bankers Charge for Their Services
• Investment bankers focused on raising capital usually work on a
contingency basis, charging a percentage of the capital raised, although
small retainers may also be charged.
• The contingent fee or “success” fee is usually paid at closing and
funded out of the proceeds of the new capital raise.
• This fee structure aligns everyone’s interest, so the company is only
paying the fee upon a successful capital raise.
Strategic Advisory | Capital Raising | Mergers & Acquisitions

15. Structuring and Financing a Partner Buyout | 15
6. Using an Investment Banker to Raise Capital
How a Good Investment Banker Adds Value for a Business Owner Raising Capital
FEATURE BENEFIT
• Minimizes management distractions, allowing the
executive team to focus on running the business
• More time for management to focus on running the
business and avoid getting distracted
• Evaluates multiple capital alternatives to help you
choose the financing structure that works best for
the business and remaining shareholders
• Ensures capital is structured in a way that
minimizes borrowing costs (or dilution) and allows
for adequate operating flexibility
• Positions the company and funding opportunity in
a way the is the most compelling to the likely
funding sources
• Results in broader interest from capital providers,
often at lower costs and better terms; usually
results in a faster close
• Have access to many, many financing sources
that go beyond relationships with local bank
lenders
• Ensures availability of capital when a bank can’t
provide enough capital or doesn’t provide enough
flexibility
• Creates a competitive environment for the
financing, forcing funding sources to compete
and put their best foot forward
• Forces funding sources to get more aggressive
pricing and structure, reducing borrowing costs
• Solicit multiple financing proposals, including
backup financing offers
• Improves the probability of a successful funding
Strategic Advisory | Capital Raising | Mergers & Acquisitions

16. Structuring and Financing a Partner Buyout | 16
Save Time. As an executive, the most important resource you have is time. We’re a turnkey solution to
help you evaluate every option, then we structure, source, negotiate and help close the deal. We minimize
the distraction of raising capital so you can focus on driving your business to the next level.
Leverage Our Expertise. We specialize in raising capital for middle market companies and financial
sponsors and have access to literally thousands of funding sources across the planet. Whether you're
replacing an existing lender, financing an acquisition, buying out a partner or recapitalizing the company,
we know which funding sources will provide the best terms, with the most flexibility and be the best fit for
the situation.
Get the Best Possible Pricing, Terms and Structure. We run a competitive financing process for each
of our clients. That process forces funding sources to put their best foot forward and meet critical
deadlines.
Certainty of Closing. Access Capital Partners is acutely focused on putting its clients in the best position
to achieve a successful outcome. With years of experience in raising capital in all types situations and
across many industries, we're constantly focused on identifying and preemptively addressing potential
obstacles that may make it difficult to raise the capital your company needs, so you can close on schedule.
WORKING WITH ACCESS CAPITAL PARTNERS
Strategic Advisory | Capital Raising | Mergers & Acquisitions

17. $8.0B+ 100+ 35+ 1000+
In total transaction
experience
Completed transactions Years of middle market
experience
Relationships with capital
providers and strategic
buyers across the globe
Access Capital Partners is an Investment Bank Focused on Helping Middle Market
Business Owners Create and Preserve Wealth By Providing Unmatched Strategy,
Capital, and Merger and Acquisition Advisory Services.
ABOUT ACCESS CAPITAL PARTNERS
Access Capital Partners
7733 Forsyth Blvd., Suite 1168
St. Louis, MO 63105
314.783.9550
www.accesscappartners.com
Securities offered through StillPoint Capital LLC, Member FINRA and SIPC Tampa, FL 33626. StillPoint Capital is not affiliated with Access Capital Partners.
Greg Porto
312.339.2857
gporto@accesscappartners.com
Greg Tobben
314.458.8186
gtobben@accesscappartners.com
Strategic Advisory | Capital Raising | Mergers & Acquisitions