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jdhaas
jdhaas, Attorney
Category: Business Law
Satisfied Customers: 2998
Experience:  23 years of business law experience
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In a leverage (management) buyout, what percentage of the ...

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In a leverage (management) buyout, what percentage of the company stock is it wise and customary for the President of the company to retain.
Submitted: 9 years ago.
Category: Business Law
Expert:  jdhaas replied 9 years ago.
That depends upon a lot of facts. If this is a small corporation, it is customary for the president, if the president is one of the primary owners, to retain 50.1 or 51% of the stock so that the owner/president retains control.

If this is a larger corporation, with many shareholders, if the president is one of the primary owners, then the president keeps a smaller percentage of the stock, but still enough to maintain control--whether that is a majority or a plurality of the stock. Please let me know if you have other questions.

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jdhaas and 2 other Business Law Specialists are ready to help you
Customer: replied 9 years ago.
Reply to jdhaas's Post: Just as a quick follow up in order to fully understand your answer I would offer the following:

There are five of us in senior management that have decided to make an offer on our $30M (sales) business. I am the President of the company and the other managers have agreed that I should remain President. As we near the point where we will make our offer to the current owner the discussion of what percentage of the company each of the management team should expect came up and thus the question I proposed.
Expert:  jdhaas replied 9 years ago.
Thanks for the clarification. In a transaction this size I recommend corporate counsel in your state.

That being said, some general information: If the 5 agree to equally run the company, all 5 could have 20%. This might create problems since 5 equal owners may be difficult to manage. If some managers are putting up more money in the purchase, they could have shares in percentage to their payment. For example 3 @ 25% and 2 managers at 12.5%. Or the president could have 30% and the other 4 managers have 17.5%. There are many formulas that could be followed: amount of payment, equal control, etc.

This transaction is presumably much more complex than this forum will allow in answering. I hope that I have given you some information as to common formulas. In a transaction of this size, corporate counsel is needed to protect your rights. Please contact counsel in your area. Thank you.

I hope that I have helped you, answered all of your questions,
and that I have provided you with useful information.
Please ask more questions if I have not answered all of your
questions.

In the future, if you would like to specifically ask me a question,
you can ask for me in the body of the question.


Please be aware that my answer is not legal advice,
it is merely information. The only way that I am legally
responsible for your legal rights is if you have signed
a written retainer agreement with my law firm.