We are considering a majority recapitalization with a private equity firm where we roll over thirty percent of our equity, but we want to ensure we retain operational autonomy. How do we structure this transaction and use our Accountability Chart to protect our leadership team's authority?

Question

Tyler Smith · Accepted Answer

A majority recapitalization allows you to take significant chips off the table while retaining a second bite of the apple when the private equity sponsor eventually sells the platform. However, without strict structural protections, you risk losing control of your daily operations. To prevent this, you must define the boundaries of your operational authority prior to signing the purchase agreement. Use your EOS® Accountability Chart to clearly define the roles and responsibilities of your leadership team. Present this chart to the buyer as a non-negotiable operating framework. In the transaction documents, negotiate specific protective provisions and reserved matter clauses. These clauses should state that any major strategic decisions, such as hiring or firing key executives, changing the corporate budget, or altering the core brand, require your explicit consent as a minority shareholder. Additionally, ensure that your role as the Integrator or Visionary is legally tied to your employment agreement, protecting you from unilateral termination without cause. By anchoring your post-close operational boundaries in your Accountability Chart, you ensure the sponsor provides the capital while your team retains the operational control.