Your path forward depends entirely on your position. A founder selling the entire business faces a different process than a minority shareholder cashing out a small stake, or an employee trying to sell vested equity. Restrictions, valuation methods, and timelines vary widely across these scenarios.
This guide walks through the step-by-step process, how valuation actually works, the restrictions that trip people up, and when professional help makes sense.
Key Takeaways
- Private shares are illiquid: a sale usually needs company approval, a willing buyer, and a formal valuation
- Rights of first refusal, buy-sell agreements, and holding periods often limit who can buy and when
- Valuation usually rests on last funding-round pricing, precedent transactions, or an independent appraisal
- Founders selling control face a different process than minority shareholders
- Advised companies are 60% more likely to complete a sale and price 6% to 25% higher (Axial)
Understanding Your Selling Options
"Selling shares" means different things depending on how much control you hold. A majority interest, generally more than 50% of voting power, carries decision-making authority. A minority interest doesn't, and that distinction shapes everything from your buyer pool to your price.
Selling as a Controlling Owner or Founder
Founders selling a majority or full stake typically run a formal sale process: an asset sale, stock sale, or merger. This involves:
- Confidential buyer outreach across strategic acquirers, private equity firms, and family offices
- Structured due diligence
- Deal structuring around price, terms, and post-sale involvement
According to RSM's sell-side M&A framework, once preparation is complete the process typically spans 3-6 months of marketing, 6-8 weeks of buyer diligence, and 2-4 weeks to close (RSM). Most founders at this stage bring in an M&A advisor or investment bank to run a competitive process rather than negotiate with a single buyer.
Selling as a Minority or Non-Controlling Shareholder
Employees, early investors, and family members holding minority stakes generally sell through:
- Internal buybacks (the company repurchases shares)
- Secondary marketplaces for smaller stakes
- Company-sponsored tender offers
Company-specific restrictions usually limit these transactions, and minority stakes fetch lower valuations since the buyer isn't acquiring control. Private tender offers, per Cooley GO, generally must stay open at least 20 business days to give shareholders time to decide (Cooley GO).
Step-by-Step Process to Sell Private Company Shares
Step 1: Review Your Shareholder Agreements and Bylaws
Before doing anything else, check your governing documents for:
- Rights of first refusal (ROFR)
- Transfer restrictions or required company approval
- Holding periods
- Buy-sell agreements dictating eligible buyers and pricing formulas
Skipping this step is the single biggest cause of blocked or delayed sales.
Step 2: Obtain or Commission a Valuation
You need a realistic number before you approach anyone. Common approaches include:
- Last funding round price: useful for startups, though not automatically the current value of every share class
- Precedent transactions: comparing recent sales of similar companies
- Independent professional valuation: required for founders selling a full middle-market business
For full-company sales, valuation ties to EBITDA multiples and market comparables, not a funding-round proxy.
GF Data's Q3 2025 report on private-equity-sponsored middle-market deals ($10M–$500M) put the average purchase price at 7.5x trailing-12-month adjusted EBITDA, up from 6.9x the prior quarter (GF Data). That number sets expectations before you open buyer conversations.
Step 3: Identify and Approach Potential Buyers
Your buyer pool depends on your stake size:
- Internal buyers: existing shareholders or the company itself
- External buyers: strategic acquirers, private equity firms, family offices
- Secondary marketplaces: better suited to smaller, minority stakes
Exit Boston builds that buyer universe by profiling prospects against acquisition criteria, transaction history and strategic fit, then asking who has closed deals like this one and whose capital structure fits.
Step 4: Notify the Company and Navigate Approval Processes
If a ROFR applies, the company or existing shareholders typically get a window to match your offer before you can sell externally. Industry sources point to a 30-60 day range, though the exact window depends entirely on your specific agreement (Forge Global). Read your documents for the controlling timeline.
Step 5: Negotiate Terms and Structure the Deal
Beyond price, you're negotiating structure:
- All cash: simplest and most common for smaller stakes
- Rollover equity: seller retains a piece of the business post-sale
- Earnout: part of the price is contingent on future performance
When several qualified buyers evaluate at once, each knows that delay may cost them the deal. A founder negotiating alone has no such lever.
Step 6: Finalize Documentation and Close
The final stretch requires:
- A stock transfer or purchase agreement
- Legal review of terms and representations
- Fund settlement and share transfer
Confirm signatures, funds clearance, and cap-table updates before treating the sale as done.
Key Factors That Affect Your Sale and Its Value
Price and outcome hinge on preparation as much as market conditions. Restrictions, stake size, business readiness, and tax treatment each move what you can achieve.
Company-Specific Restrictions
ROFR clauses, buy-sell agreements, and share accumulation limits narrow your buyer pool. Fewer eligible buyers generally means less negotiating leverage.
Ownership Position (Controlling vs. Minority)
Controlling stakes command a premium because the buyer gains decision-making power. Minority stakes are typically discounted because the holder can't direct company strategy. There is no fixed discount percentage for private shares; the adjustment is assignment-specific.
Business Readiness and Institutional Appeal
For founders selling the full company, institutional buyers scrutinize how dependent the business is on the owner. Reducing that dependency matters. In one documented engagement, preparation over six months included:
- Building management capability that doesn't rely on the founder's direct involvement
- Introducing a management incentive program tied to long-term growth
- Securing the founder's commitment to stay involved for two years post-close
- Converting short-term purchase orders into extended supply agreements
A strong confidential information memorandum (CIM) supports that work: history, market, customers, management, financials, growth strategy and risks.
Tax Implications
Capital gains treatment depends on your holding period. The IRS taxes assets held more than one year as long-term gains (generally 0%, 15%, or 20%, depending on income), while shorter holds are taxed at ordinary income rates (IRS Topic 409).
Qualified Small Business Stock (QSBS) exemptions can also cut taxes on eligible shares, but the rules are specific. Talk to a tax advisor before you sign anything.
Common Mistakes to Avoid When Selling Private Shares
Process missteps are what stall private share sales after a buyer is already interested. Avoid these three:
- Skipping the agreement review: Blocks the sale after you’ve already found a buyer
- Accepting the first offer: Without a real valuation or competitive tension, you leave money on the table
- Underestimating timelines: ROFR windows and company approvals routinely stretch closings months longer than sellers expect
When to Work With an M&A Advisor
Founders selling a controlling stake in a middle-market company, generally in the $10 million to $100 million revenue range, face buyer sophistication and deal complexity that a simple share transfer doesn't involve. The buyer has done this dozens of times, the founder once.
A 2016 survey of 85 owners who sold with a middle-market investment banker found that 84% reported a final price equal to or higher than the banker's initial estimate, with 50% reporting a higher price (Fortune/McDonald study). That kind of outcome is why founders in this band usually hire middle-market counsel instead of running a full process alone.
Exit Boston, based in Danvers, Massachusetts, advises founders in this revenue range. Founder Rick McDonald has been directly involved in 50 to 100 closed middle-market transactions over more than two decades. The firm's approach includes:
- Preparing founder-led businesses for institutional buyer scrutiny
- Building competitive tension among private equity firms, strategic acquirers, and family offices
- Structuring deals around the founder's financial and legacy goals
Past engagements include a food-and-beverage sale that closed at a $150 million valuation and a software-company sale to a strategic acquirer where the target had $14 million in revenue.
Minority shareholders with smaller stakes typically don't need full M&A representation. Consulting a valuation professional and tax advisor before selling is still worth doing.
Frequently Asked Questions
What are the requirements for selling shares in a private company?
You'll typically need to review shareholder agreements for transfer restrictions, get company approval where required, secure a valuation, and find an eligible buyer willing to accept those terms.
What are the tax implications of selling private company shares?
Gains are generally taxed as capital gains: long-term rates apply if held over a year, short-term (ordinary income rates) if held a year or less. QSBS exemptions may apply for eligible stock. Consult a tax advisor for your specific situation.
How do I value my shares in a private company?
Common methods include the last funding round price, precedent transactions analysis, or an independent professional valuation. The last is standard for founders selling a controlling stake in the full business.
Can I find out how much a private company sold for?
Not reliably. Private sale prices aren't publicly disclosed the way public trades are, though details sometimes surface through press releases, funding announcements, or industry reports.
Can I be forced to sell my shares in a private company?
Yes. Drag-along provisions can let a controlling shareholder require minority holders to sell on the same terms. Employment-linked transfer triggers and company buyback rights can also compel a sale.
Why would a CEO sell shares of their company?
Common reasons include personal liquidity needs, diversifying concentrated wealth, retirement or succession planning, or pursuing a full exit to capture the value built into the business.
