We want to execute a majority recapitalization with a private equity group to take some chips off the table, but we want to keep running the business on our own terms. How do we structure the post-transaction governance so that our leadership team retains operational control of our EOS process and Rocks?

Question

Tyler Smith · Accepted Answer

A majority recapitalization can provide massive liquidity while letting you participate in the second bite of the apple. However, private equity sponsors often try to impose their own operating systems, steering committees, and corporate reporting requirements. If you are not careful, this will dismantle the EOS® culture that made your business successful in the first place.

To protect your operating model, you must secure operational governance rights in the shareholder agreement before signing the definitive deals. Do not leave this to chance or trust a verbal agreement. Structure the legal documents to protect the authority of your leadership team and the integrity of your operating system.

Specifically, negotiate provisions that secure the following rights:

- The business will continue to run on the EOS® platform, utilizing its tools, including the V/TO®, Rocks, and Level 10 Meetings™, as its primary operating framework.
- The existing leadership team, as defined by your Accountability Chart, retains unilateral authority over day-to-day operations and hiring decisions within the approved budget.
- The board of directors' oversight is restricted to major strategic decisions, such as debt incurrence or acquisitions, leaving tactical execution to the Integrator.

By formalizing the protection of your operating system in the transaction documents, you prevent the sponsor from introducing paralyzing bureaucracy. You preserve the agile, results-oriented culture that drives your company's value, ensuring a successful second exit.