The Owner Exit Conversation Is Broken: Why You're Only Ever Shown Two Doors

I've sat on both sides of the table on more than 100 M&A transactions. I've run five companies and sold one for $1.8 billion. And I can tell you the exit conversation most owners get is missing an entire option - not because it doesn't exist, but because almost nobody in the room profits from mentioning it.

The two doors owners are usually shown

When an owner starts thinking seriously about an exit, the conversation almost always narrows to two paths, and fast.

Door 1: Sell to private equity. You give up control. A sponsor's board typically holds veto rights over financing, major transactions, and the timing of any future sale, even at a minority ownership stake (Kirkland & Ellis). A meaningful share of your proceeds - commonly 15-30% - gets required as rollover equity you can't take as cash, held for years until the fund decides it's time to sell again (CT Acquisitions). Any earnout on top of that pays out an average of roughly 21 cents on the dollar of its stated maximum (Kadenwood Group, citing SRS Acquiom).

Door 2: Sell to a competitor or strategic partner. This solves the liquidity problem but usually means opening your books, your client relationships, and your operational playbook to someone who competes with you directly. It also frequently means your team - the people who helped build the thing you're selling - gets restructured or let go once the acquirer folds your operations into their own.

There's an unspoken third option owners default into by not choosing: do nothing. Your net worth stays locked inside one illiquid asset - the business itself - indefinitely, with no real plan for when or how that changes.

Why these are the only two doors you're shown

Investment bankers, business brokers, and private equity firms only get paid when a deal closes in one of those two categories. A broker's fee only exists if a sale to a strategic buyer or financial sponsor actually happens; a private equity fund's business is buying companies, not helping owners avoid selling to one. Neither party has a financial incentive to walk you through a structure where the buyer is your own leadership team instead of them.

That's not a conspiracy. It's a straightforward incentive problem, and it's a big reason why a meaningful share of business owners go into their own exit undereducated about what's actually available to them. National surveys of business owners have found real movement on this over time - one industry report found 70% of surveyed owners in 2023 considered themselves knowledgeable about all their exit options, up from just 34% a decade earlier (Impact Financial Strategies, 2023 National State of Owner Readiness Report) - but that still leaves roughly three in ten owners without a full picture, and other regional surveys have found the gap considerably wider (Cornerstone Business Services).

Door 3: the option that's been in the tax code since 1984

There's a third path that almost never gets mentioned in that first meeting: an Independent Buyout. Your existing leadership team becomes the buyer, financed against the business itself using a mechanism that's been part of the federal tax code for over four decades, under Internal Revenue Code Section 1042 (Cornell Law School, 26 U.S. Code § 1042). Depending on your specific facts, it can potentially be structured for tax-advantaged treatment on the proceeds - always confirm the details with your own tax advisor before assuming a particular outcome applies to you.

It isn't unknown because it's new or unproven. It's under-known because, as I've told owners directly: private equity pitches private equity. Nobody's business model depends on telling you about the option where you don't sell to them.

What Door 3 solves that the other two don't

• You get real liquidity - comparable to what a private equity deal would offer, without a forced rollover reinvestment stripping a chunk of it back out.
• Your team keeps their jobs. Leadership already knows how to run the company, because they're the ones buying it.
• Your competitors and clients don't see your books. There's no strategic acquirer combing through your operations during a competitive sale process.
• Control stays inside the company. No outside sponsor's board seat, no veto rights over your own financing or growth decisions.

Frequently asked questions

Why haven't I heard of an Independent Buyout before? Most of the professionals who typically advise owners on an exit - brokers, investment bankers, and private equity firms themselves - are compensated only when a deal closes in the category they specialize in. None of them have an incentive to introduce a structure where their own role in the transaction disappears.

Is an Independent Buyout a new or experimental structure? No. The underlying tax mechanism, Internal Revenue Code Section 1042, has existed since 1984. What's changed recently is how well it's known outside of the advisory firms that specialize in it.

Does "doing nothing" actually count as a real option? It's the default outcome for owners who don't act, but it isn't a plan - it leaves your net worth concentrated in a single illiquid asset with no defined timeline or path to change that.

Does an Independent Buyout work for every business? It's generally evaluated for companies with $3 million or more in EBITDA, and every business's specific facts determine what's actually achievable - it isn't automatically the right structure for every owner or every situation.

What's the first step if I want to explore this instead of just the standard two options? Start with a conversation about your specific numbers and goals before you commit to a process built around only Door 1 or Door 2.

Sources

• Kirkland & Ellis - "Minority Investments By Private Equity Funds"
• CT Acquisitions - "Founder Rollover Equity Benchmarks (2026)"
• Kadenwood Group - "Your earnout is worth 21 cents on the dollar"
• Impact Financial Strategies - "2023 National State of Owner Readiness Report"
• Cornerstone Business Services - "Research Report"
• 26 U.S. Code § 1042 - Cornell Law School Legal Information Institute

The bottom line

Two doors were never the only two doors - they were just the only two that paid the person showing you the room. An Independent Buyout has been sitting in the tax code since 1984, available to the right kind of business, and almost nobody whose job it is to advise owners on an exit has an incentive to mention it.

If your company is doing $3M+ in EBITDA and you want to see what Door 3 could actually look like for your specific business, talk to IBO Advisors about your business.