A liquidity event is any transaction that converts illiquid ownership in a private business into cash or marketable assets, a sale, recapitalization, IPO, or management buyout that gives the owner access to the wealth built in the business.

For most private business owners, the vast majority of their net worth is locked inside the business in a form that cannot be spent, invested elsewhere, or passed to heirs without a triggering event. The liquidity event is that trigger, the moment when business equity becomes personal wealth.

Not all liquidity events are full exits. A recapitalization that sells a 40 percent stake to a private equity partner is a partial liquidity event, the owner accesses a portion of the equity while retaining control and continuing to participate in future growth. A full sale is a complete liquidity event. Understanding the range of available liquidity structures, and which combination of price, control, and timing best serves the owner’s goals, is a central output of the exit planning process.

Understanding where a business sits on both dimensions is the starting point for every exit planning conversation. See how Wefinx approaches exit planning.

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