EO sales are financed 100% by debt and company cash.
At the time of the transaction, the seller will receive the amount of the bank loan issued for the transaction and any cash built up in the company for the buyout. The remaining amount will be financed by a “seller’s note”. This is a loan from the seller, to be paid out over a period of time.
The majority of company stock is sold to the EO Trust, on behalf of all employees.
In the case of a hybrid model, some stock may also be sold directly to select employees.
Sellers who don’t get paid out right away may also receive warrants, which are a form of synthetic equity. This allows sellers to participate in the growth of the value of company shares while they wait to be fully paid out.