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My partner wants to buy out my share of our merged business for considerably less than its worth - he's a good friend - what should I do?
After running a successful business independently for 10 years, I merged my business with a smaller, but growing, business run by a good friend. After 18 months of growing the resultant merged business, contributing customer base and technology to the merger, my friend / business partner wants to buy out my portion of the merged business, but wants to pay considerably less than it is worth, telling me that he will continue to use my services in the future as an independent contractor, but unwilling to write a contract to that effect. He's a friend and someone I have trusted, but he's set on offering about 1/10 of the actual value. What should I do?
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October 08, 2009 02:56 PM
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As you've obviously been a successful businessman, the best advice I can give you is to keep acting as a businessman. Don't mix personal with business. If you would have made the same deal with a stranger (which I doubt), go for it. If not, get a better arrangement.
You should tell your partner that you have to approach this in a professional, business-like manner, if only to protect your family or loved ones from potential financial hazard. If he truly is a friend, he’ll get your point, and agree to either put things in writing, or pay a better amount for your company shares.
If he keeps refusing, you should really be concerned, and just decline the offer of taking over your shares. A true friend would never put you in a situation where you would have to make a business decision based on ‘trust’ alone.
This type of business-private relations mixups are one of the biggest sources of family conflicts, and often end up in court when they really mis-fire. It can be easily avoided by making a proper business deal, which benefits both.
Why don’t you make him a counter-offer, where he pays you the normal fee for the shares, and you offer to work as a contractor for a lower fee than usual? That way, you have your security, and he has the same value for his deal, provided he holds up his part of the deal, and hires you after the deal is done.
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You should tell your partner that you have to approach this in a professional, business-like manner, if only to protect your family or loved ones from potential financial hazard. If he truly is a friend, he’ll get your point, and agree to either put things in writing, or pay a better amount for your company shares.
If he keeps refusing, you should really be concerned, and just decline the offer of taking over your shares. A true friend would never put you in a situation where you would have to make a business decision based on ‘trust’ alone.
This type of business-private relations mixups are one of the biggest sources of family conflicts, and often end up in court when they really mis-fire. It can be easily avoided by making a proper business deal, which benefits both.
Why don’t you make him a counter-offer, where he pays you the normal fee for the shares, and you offer to work as a contractor for a lower fee than usual? That way, you have your security, and he has the same value for his deal, provided he holds up his part of the deal, and hires you after the deal is done.
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October 08, 2009 02:45 PM
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Friendship set aside, business is business. So ask you self the same question if a stranger were to come and offer you the same deal. Not so attractive. With your business being the dominant business in the merger makes you share a big consideration as far as success and profits are concerned. 18 months is not a long time for a partnership. I would wonder if there was something else that would want him to end our partnership so soon. Is he feeling some type of discord? Maybe we will never know that.
As far as him not wanting to commit to a contract leaves me alittle more leary. If he actually intends to use you as an independent contractor, why not commit. Even good friends will do things that are underhanded. This deal seems shakey.
For me, I would offer 1 of 2 options.
First I would offer to let him buy me out for what my business was worth when we merged.
Or
I would raise the amount he wanted to give me by a little and request a percentage of profit for a certain number of years.
I believe that option one is the best option because then you are done. If he does infact use you as an independent contractor it is great but at least you wont be sitting around wondering because you will have enough capitol to start again if you wish to do so.
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As far as him not wanting to commit to a contract leaves me alittle more leary. If he actually intends to use you as an independent contractor, why not commit. Even good friends will do things that are underhanded. This deal seems shakey.
For me, I would offer 1 of 2 options.
First I would offer to let him buy me out for what my business was worth when we merged.
Or
I would raise the amount he wanted to give me by a little and request a percentage of profit for a certain number of years.
I believe that option one is the best option because then you are done. If he does infact use you as an independent contractor it is great but at least you wont be sitting around wondering because you will have enough capitol to start again if you wish to do so.
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October 08, 2009 10:09 PM
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This may sound simplistic, but friendship is friendship, and business is business.
Good friendships can only be sustained with good business practices.
You cannot possibly accept an offer worth 1/10 its fair market value. Tell your friend this, be clear. Reiterate that it has nothing to do with business nor your friendship, it is just business. That you would never expect anything less if the situation were reversed. You are in the right in this, and friendships are meant to withstand different opinions, especially when one sees that the other is in the wrong.
If your friend fails to see this , then more likely than not the friendship was doomed to end by some other means at some point in the future.
Defend what is yours, a real friend would expect nothing less and would respect you for it.
If it is a question of cash availability, suggest to your friend that you are willing to finance the purchase of your share. Perhaps ten percent now, with the remainder split over 2 years. If you do choose this option, make sure the deal is properly structured by a lawyer.
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Good friendships can only be sustained with good business practices.
You cannot possibly accept an offer worth 1/10 its fair market value. Tell your friend this, be clear. Reiterate that it has nothing to do with business nor your friendship, it is just business. That you would never expect anything less if the situation were reversed. You are in the right in this, and friendships are meant to withstand different opinions, especially when one sees that the other is in the wrong.
If your friend fails to see this , then more likely than not the friendship was doomed to end by some other means at some point in the future.
Defend what is yours, a real friend would expect nothing less and would respect you for it.
If it is a question of cash availability, suggest to your friend that you are willing to finance the purchase of your share. Perhaps ten percent now, with the remainder split over 2 years. If you do choose this option, make sure the deal is properly structured by a lawyer.
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October 09, 2009 01:58 AM
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Can you un-merge and go your separate ways, businesswise? Kind of like a business divorce? That is what I would want, in your circumstances. I think that is the only way to come out ahead businesswise and possibly save the friendship. You will probably need to hire a mediator to finalize this and make it legal for you, but that shouldn't cost too much.
If you go this route, just kind of laugh and say to your friend something like, "I think we got in this over our heads when we merged! Let's un-merge while this still tastes good!"
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If you go this route, just kind of laugh and say to your friend something like, "I think we got in this over our heads when we merged! Let's un-merge while this still tastes good!"
eight years of liability claims experience Helpful Answer?
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October 09, 2009 06:40 AM
In this case, all the assets, tangible and intangible, like customer lists, good will, technology, and affiliate contacts have already been shared and merged and can not easily, if ever, be separated. I am in a position of literally having to start over again. I may still have a good name, personally, with my clients, but I will have to advertise under a new "brand" name because the old "brand" name was part and parcel of the merger. Being offered a price so sub-par has already soured my taste for pursuing business together and I find myself having trouble believing any future promises at this point.
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October 09, 2009 04:37 AM
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One tenth?! Wow! I'd personally tell him how insulted I am, and that I'd rather let it go to zero then go through with such a disrespectful offer. I once heard Ivanka Trump (Donald Trump's daughter) say that her father's discount policy is "friends and family: 10% more!" It's assumed she was kidding but there's an interesting idea behind the statement, and that is that you don't compromise the integrity of your pricing just because you know or like the person you're dealing with.
Lots of deals are done now with owner financing. Offer him the business at a fair price, take the full amount or almost the full amount back in a note, but demand his house as collateral. If he wants to negotiate, fine. However, if this makes him scream and run, you never really had a deal anyway; just someone who wanted to take advantage of you.
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Lots of deals are done now with owner financing. Offer him the business at a fair price, take the full amount or almost the full amount back in a note, but demand his house as collateral. If he wants to negotiate, fine. However, if this makes him scream and run, you never really had a deal anyway; just someone who wanted to take advantage of you.
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October 09, 2009 07:15 AM
Thanks windowshopping2! If there's ever anything I can do to help, please let me know. I have a fair bit of experience with stuff like this.
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October 11, 2009 11:26 AM
It played out as follows (not pretty):
I counter-offered fair market value, taking the initial offer up front with payment terms for 5 years. He refused and tried to implement a hostile takeover through his lawyer by changing the business charter (LLC) and restructuring the board of directors (he and his wife were both on the board, as was I). In addition he locked me out of the business, and locked me out of the computer system, and discontinued all owner draws to me and reimbursement of my business expenses. I was told by them to take the original offer within 10 days or walk away with nothing I involved a lawyer, who threatened an injunction and a cause of action suit for breach of contract (partnership contract and merger). He hired a different lawyer who asked us to consider mediation to avoid a costly court battle. We went to mediation (he didn't come, his wife did with his power of attorney). I ended up getting about 1/3 of the fair market value and gave up all rights to the merged entity with the exception that if it is sold within 5 years, I will receive a percentage of the sales price. I did not give up my access to clients nor my right to use any technology which I contributed. However, neither did they.
Ultimately, nobody got what they wanted. The friendship was irretrievable fractured. One month after the conclusion of the mediation, they moved offices into a new facility which they bought outright. It was never that they didn't have the money or the wherewithal to give me fair market value - in my mind it boiled down to greed. He valued money over friendship and integrity.
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I counter-offered fair market value, taking the initial offer up front with payment terms for 5 years. He refused and tried to implement a hostile takeover through his lawyer by changing the business charter (LLC) and restructuring the board of directors (he and his wife were both on the board, as was I). In addition he locked me out of the business, and locked me out of the computer system, and discontinued all owner draws to me and reimbursement of my business expenses. I was told by them to take the original offer within 10 days or walk away with nothing I involved a lawyer, who threatened an injunction and a cause of action suit for breach of contract (partnership contract and merger). He hired a different lawyer who asked us to consider mediation to avoid a costly court battle. We went to mediation (he didn't come, his wife did with his power of attorney). I ended up getting about 1/3 of the fair market value and gave up all rights to the merged entity with the exception that if it is sold within 5 years, I will receive a percentage of the sales price. I did not give up my access to clients nor my right to use any technology which I contributed. However, neither did they.
Ultimately, nobody got what they wanted. The friendship was irretrievable fractured. One month after the conclusion of the mediation, they moved offices into a new facility which they bought outright. It was never that they didn't have the money or the wherewithal to give me fair market value - in my mind it boiled down to greed. He valued money over friendship and integrity.
October 11, 2009 10:33 PM
Wow, sorry to hear it turned out that way. Since it turned so hostile, I guess in a way it's good that you're not holding any of their debt. While karma may not be reliable 100% of the time, people who do things like this really do get their just desserts because they never change. They'll pull it on the next guy too, and then he'll take them for all they're worth.
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October 09, 2009 07:45 AM
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i think you can's trust him anymore. get your merged business back!
http://www.beautyjordan.com
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