Reducing the risk of conflict when proposing a partnership buyout

Partnership buyouts are a common type of organizational transition. They occur for many different reasons, and can either benefit a company or put the business itself at risk.

Conflict between business partners could lead to operational instability or even the dissolution of the organization. The buyout process could also harm the relationship between the partners. How can one partner suggesting a buyout minimize the conflict involved in that transition?

Keep the matter professional

Business relationships are often very personal, but that does not mean that a buyout needs to become a personal conflict. Conversations may need to acknowledge misconduct or issues with performance but do not need to impugn the party receiving the buyout offer. Instead, the focus can be on the needs of the company. The partner contemplating the buyout may be less defensive when they understand that the decision has more to do with money and operational control than them as a person.

Make the offer attractive

Occasionally, when a buyout occurs due to misconduct, the biggest benefit for the party receiving the offer could involve successfully avoiding litigation. Partners may sign a contract agreeing not to litigate misconduct provided that someone cedes their interest in the company and does no further harm to the organization.

Other times, the partner suggesting the buyout needs to offer financial compensation. A combination of both a portion of the company’s value and possibly continued employment benefits for a set amount of time can take some of the sting out of accepting a buyout offer. The partner proposing the buyout typically needs valuation reports and other documentation that can help prove their offer is reasonable given the company’s current resources.

Propose the offer in person

Occasionally, there are circumstances that prevent partners from sitting down to discuss the future of the company directly with one another. However, such scenarios are relatively rare. Having an in-person conversation can take some of the sting out of what may feel like a cold and impersonal business move. The partner proposing the buyout may also need to give the other partner a certain amount of time to consider the offer before demanding a response.

Partners who are preparing to make a buyout offer typically need to prepare themselves to litigate if they cannot convince their partner to accept their offer. Seeking to minimize conflict but preparing for the worst-case scenario may benefit those trying to preserve or improve an organization through a buyout.

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