The largest owner of a successful consulting engineering firm wanted to retire in five years and diversify his retirement savings. His younger co-owners wanted to gradually take on management responsibilities and acquire his ownership interest.
The owners developed and entered into a gradual purchase arrangement. The business redeemed the selling owner’s interest over five years based on a price linked to the company’s earnings. The remaining owners know the business can afford the formula-based buyout price, while the selling owner will benefit from the growth and profitability of the business.