| This article could have been titled “The Pros | | | | investment proposal. |
| and Cons of a 50/50 Equity Partnership”, but | | | | What if one of the partners acquires an asset for |
| the cons far outweigh the pros. When | | | | the business whether it’s land, a building, a |
| partnerships are formed, the obvious concerns | | | | small data center, a thousand servers, or to |
| are addressed. How do each partner’s | | | | complicate things further contributes an intellectual |
| skills-set and experience complement each | | | | asset of some sort. When the company is going |
| other? How much will each partner contribute to | | | | to be sold, what is the value of the partner’s |
| get the business going? How long will they grow | | | | contributed asset? Who is supposed to value |
| the business until they entertain selling it? Is that | | | | it? This can become an insurmountable hurdle. |
| it? … hardly. | | | | Most buyers know not to value any one piece |
| Once the business gets going no doubt economic | | | | near what it’s worth by itself. |
| and industry variables change which affect the | | | | When it’s time to sell the company, the |
| business. Each partner’s perception of the | | | | financial situation of each partner has no doubt |
| direction the business should go changes as well. | | | | changed since the company was founded. The |
| There are constant decisions with regards to the | | | | consideration for the company could be all cash, all |
| mixture of product and service offerings … the | | | | stock or a combination of cash and stock. The |
| decision to get into another line of business or get | | | | tax implications of each of the three scenarios |
| out of one. Should the focus be on a higher | | | | are different for each partner. I have seen the |
| volume, lower profit margin business model or | | | | process of divesting a company go up in smoke |
| vice versa? What about a shift to a more | | | | too many times because the partners didn’t |
| capital intensive model. If the business becomes | | | | agree on the proposed deal. They spent years |
| a success, many times potential investors creep | | | | growing the business then totally disagree about |
| in, whether an angel investor or venture | | | | when to sell, who to sell to, and/or how much to |
| capitalist. Both partners need to agree on the | | | | sell it for. |