The second bite model

Sometimes the second sale is bigger than the first.

The idea

Sometimes the second sale is bigger than the first.

In a majority recapitalization, the founder sells control, takes cash, and keeps a stake in the new company. If the buyer grows the business and sells it in four to seven years, the founder is paid again on that stake.

When the buyer is a capable platform investor, the second bite can exceed the first. When they are not, it can be worth nothing. The model shows both.

Premium exits are not negotiated. They are prepared.
The FNDRS M&A desk

The figure

Three paths over seven years

Illustrative

Cumulative after-tax proceeds to the founder, from today to year seven.

Keep the businessRises gradually through distributions. Never has a step.
Full sale todayOne step at year zero to the after-tax proceeds, then flat, plus modest growth on what is reinvested.
Sell 70%, roll 30%A smaller step at year zero, then a second, larger step at year five: the second bite. Its size ranges from a buyer who underperforms to a buyer who doubles the business.

Illustrative. The width of the range at year five is the whole decision.

How to read it

Three lines showing the founder’s cumulative after-tax proceeds over seven years under three choices: keep, sell fully, or sell control and keep a stake. The third line has two jumps, one now and one when the buyer sells again; the size of the second jump is uncertain and shown as a range.

Timing

The time to start the conversation is now

How far out you feel is not the signal. Buyers read the trailing numbers, so time before a sale is room to move them, not a waiting room. A founder with a number in mind may reach it in one sale or in two: a majority stake now, with equity rolled into the buyer’s company for a second sale later. The sale itself, once you sign, runs in four phases.

Read the exit timing window

The sale, signing to the wire

0–0 months

Prepare

Market

Select

Close

Four phases, for a company that is ready. The conversation can start any time before.

An estimate from past engagements, not a commitment.

What you keep.