WineInStyle

Selling the company, particularly to unknown investors comes with several risks. In order to determine whether or not Eberhart should sell, there are a few things that would be necessary to know about him, and, if he wanted to sell the company, about structuring the deal.

First, Eberhart probably should not have brought on the young new investors, who pushed for the new CEO, which also came with a desire to grow more quickly (or at least not brought on the CEO when the business was growing well already). While a standard playbook, it was clear (at least from the case) that the CEO, while experienced in growing a large brand in Japan, didnt have the dedication to the business to attract the right customers or grow the business organically. As such, by the end of 2006, the business was facing a precarious cash situation, that by 2007 was forcing Eberhart to consider selling the business to unknown investors.

For Eberhart, he first has to think about whether or not he wants to continue to own the business, and thereby be willing to potentially jump back in to more active management, or if he would rather sell the business and walk away with his share. If he really cared about the future of the company, he should probably not sell the business, but if he wanted to spend more time with his family and was comfortable with selling the business with the hope that with new investors, Khoo could grow the business, then a sale might be right.

Once Eberhart had made the decision of sale or no sale, he would have to be very careful about structuring the transaction properly. Given there is limited information about the new Japanese investor group, he should require a wire for a fairly large percentage of the company with the remainder to be placed in escrow pending final diligence. The key would be to make sure the money was already transfered (and preferably into a legitimate institution), such that as long as Eberhart and the company approved the sale post diligence, the purchase consideration would be immediately transfered.

All this to say, that based on the information provided it feels like Eberhart is less engaged with the business, should agree to sell, but should not make it immediate (or at least request the consideration be placed in escrow with limited recourse for recall by the new investors).