While an owner who brings in a minority investor obviously retains control of his company, he can
rarely avoid involving the partner in his most important business decisions.
Seare Marriott & Co.’s Justin Marriott explains that a majority owner cannot
ignore the wishes of a minority partner—even if it appears that the owner has
the votes to win a boardroom ballot. Typical provisions in a minority investment
contract spell out that owner and investors must reach consensus on important
choices, such as issuing new shares, borrowing significant sums, bringing on a
new partner, acquiring companies or, naturally, selling the business.A minority investor can often assist in an entrepreneur’s most
difficult decision: how and when to exit his company. Dan Reid, national
managing principal for transaction advisory services at Grant Thornton, an
accounting and consulting firm, explains that owners who have had their wealth
tied up in their companies often find that new liquidity can engender desires to
sell out completely. "You get that comfort level. While you didn’t want to give
up control before, now you understand, ‘Hey, these people are going to do the
right thing, my employees are going to be OK, these other investors understand
the business, they’re not going to blow it away, and, by the way, I’m starting
to enjoy sailing in the Caribbean on my yacht.’"
Lee Gimpel is a business and technology writer based in Richmond,
Va.
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