Disagreement between partners over selling the company is one of the most paralysing situations in the middle market. This guide analyses the legal mechanisms, practical solutions and when a third party can unlock the impasse.
If you are reading this, you are probably in one of two situations: you are the partner who wants to sell and cannot, or you are the partner who does not want to sell and feels pressured. In both cases, the situation is paralysing. And in both cases, there are solutions that go beyond litigation.
Disagreement over selling the company is, along with founder retirement, the most common trigger for M&A transactions in the Spanish middle market. It is not an exceptional situation: it is a structural one that affects thousands of companies and that, if poorly managed, destroys more value than any economic crisis.
Disagreements over selling the company rarely emerge from nowhere. Almost always there is an accumulation of factors that, over the years, have been tolerated without resolution.
Different life horizons. One partner is 65 and wants to retire; the other is 50 and wants to continue. The first needs liquidity for retirement; the second needs the company as a source of income. Both needs are legitimate, but incompatible if no structure is found that satisfies them simultaneously.
Different visions. One partner wants to sell because they believe the company has reached its ceiling and the market is offering a good price. The other believes the company still has room to grow and that selling now would be squandering decades of work. Both may be right. The problem is that, without a resolution mechanism, the disagreement becomes paralysis.
Generational change. The deceased partner’s children inherit the stake but have neither the vocation nor the ability of their parent. They want liquidity. The surviving partner wants to continue. The company is trapped between an heir who does not understand the business and a manager who cannot afford to buy the stake.
Deterioration of the personal relationship. After decades of partnership, the personal relationship between partners has deteriorated to the point where they can no longer make joint decisions. The company runs on inertia, but strategic decisions are blocked.
For a broader analysis of shareholder conflicts, see our guide on shareholder conflict resolution.
If the articles of association or a shareholders’ agreement include a drag-along clause, the majority shareholder can force the minority to sell their stake on the same terms. It is the most efficient mechanism for unlocking the situation when the majority wants to sell.
The problem. Most Spanish SMEs do not have a drag-along clause in their articles. The shareholders’ agreement, if one exists, may not have been updated since the company was incorporated. Without drag-along, the minority has veto power.
A tag-along works in the opposite direction: it protects the minority by obliging the majority to include them in the sale on the same terms. It is a protective clause, not an unlocking one.
The Spanish Companies Act provides for the right of withdrawal in specified circumstances: change of corporate purpose, extension of the company’s duration, or — and this is relevant — failure to distribute dividends for five consecutive years in companies that have generated profits. If a partner wants to exit and the company does not distribute dividends, this mechanism may be a route, albeit a slow one.
If the company has two partners at 50% each and they are in irreconcilable disagreement, either can apply for judicial dissolution due to deadlock of the corporate bodies (art. 363.1.d LSC). It is the nuclear option: the company is dissolved and the assets are distributed. It destroys value, but it unlocks the situation.
The most frequent solution is for one partner to buy the other’s stake. The usual problem is price: the buyer offers less than the seller considers fair. An independent valuer can determine a reasonable value, but that does not guarantee the buyer has the financial capacity to pay.
Shotgun clause (Russian roulette). If this exists in the articles, either partner can make an offer for the other’s stake. The recipient has two choices: accept and sell at that price, or reject and buy the offeror’s stake at the same price. This mechanism incentivises fair offers because the offeror risks having to sell at their own price.
If both partners agree that the best solution is to sell the entire company to a third party, the disagreement is resolved. The challenge is getting to that point: often, the partner who did not want to sell changes their mind when they see a concrete offer with an attractive price.
An external investor can buy the stake of the partner who wants to exit, becoming the new partner of the one who wants to stay. This solution requires the new partner to be acceptable to the remaining partner and the terms of the future partnership to be well defined.
Blue Mountain has experience in this type of transaction. We can acquire the exiting partner’s stake and work as partners with the one who stays, contributing capital, management and a professional governance structure that reduces the risk of future conflicts.
Before turning to the courts, business mediation can unlock situations that seem irreconcilable. A professional mediator helps the partners identify their real interests — which are often different from their stated positions — and find a solution that both can accept.
An aspect many business owners are unaware of: a minority stake in an unlisted company is worth less than its proportional percentage of the total value.
If the company is worth EUR 10 million and you own 30%, your stake is not worth EUR 3 million. It is worth less, because a buyer of that stake will not have control over the company, will not be able to decide unilaterally on dividends, investments or sale, and will have difficulty selling that stake to a third party in the future.
The typical discount for lack of control and illiquidity ranges between 15% and 35%, depending on the stake size, the minority’s statutory rights and the quality of the company’s governance.
This means that, in many cases, the joint sale of the entire company generates more total value for both partners than separate sales of their individual stakes. It is a rational argument for overcoming the disagreement.
Blue Mountain has experience in transactions where there is disagreement between partners. We can act in several ways:
As buyer of the entire company. If both partners agree to sell, we can acquire the whole company with permanent capital, offering continuity for the team and the business.
As buyer of the exiting partner’s stake. We can acquire the stake of the partner who wants to exit and become the partner of the one who wants to stay, contributing capital and professional governance.
As a facilitator of the solution. In some cases, our presence as a serious and solvent buyer unlocks a disagreement that has been stuck for years. When the partner who did not want to sell sees a concrete offer from a buyer who guarantees continuity, their position may change.
What we do not do is buy stakes at fire-sale prices by exploiting the conflict between partners. We are not opportunistic investors: we are long-term investors seeking sustainable projects.
You can read more about our investment philosophy or see our guide on shareholders’ agreements to understand how to prevent these conflicts from the start.
If you are in this situation — whether as the partner who wants to sell or the one who does not — we are available for a confidential conversation.
By Dirk Manuel Martens Jiménez
By Dirk Manuel Martens Jiménez
By Dirk Manuel Martens Jiménez
If you wish to explore a potential collaboration or present an investment opportunity, we invite you to contact us. We guarantee absolute confidentiality in all our conversations.