The Detention Owner’s Fork in the Road: Five Exit Paths That Define Your Legacy — Not Just Your Valuation

By Darrick Hutchens, Managing Partner, Monon Wealth Management

The corrections construction and detention equipment industry is at an inflection point. Aging ownership, consolidation and rising borrowing costs have made the next decade one of the most consequential eras for business owners. 

Every owner of a specialized firm — whether you build correctional facilities or manufacture the equipment that secures them — understands the power of a blueprint. You wouldn’t start a multimillion-dollar project without a plan, yet many owners approach their own exit without one. 

The Scorecard of Success 

For most leaders in this space, transitioning the business will be the single largest financial event of their lives. But the best path forward isn’t always the one with the biggest dollar figure. It’s about the Legacy Scorecard — preserving your name, rewarding your people and securing your family’s future. 

At Monon Wealth Management, we believe exit planning begins not with a spreadsheet but with a conversation. The defining question is: 

“What do I want the next 100 years of my company to look like — and what do I want my personal life and freedom to look like?” 

Your answer determines which of five exit paths will define your legacy. 

 The Five Paths: Matching Exit to Objective 

The structure of your exit should follow your personal and enterprise objectives. Here are the five most common paths we see among successful business owners. 

1. Private Equity Sale – “TheBlue Sky Model” 

Goal: Freedom 

Objective: Maximize liquidity and fully retire. 

Focus: Demonstrate recurring revenue and low owner dependence to earn the highest multiple. 

For owners seeking maximum liquidity, cash is king. The goal is to build a self-sufficient enterprise that can thrive without you — allowing private equity buyers to pay top dollar for predictable profits. 

2. Key Employee Buyout – “The Continuity Model”

Goal: Stability 

Objective: Reward loyal employees and preserve culture. 

Focus: Structure a tax-efficient buy-sell agreement and long-term promissory notes for gradual transfer. 

This model favors longevity over price. It transitions leadership to trusted team members who already understand the company’s DNA — protecting both culture and client continuity. 

3. Inter-Family Transfer – “The Heirloom Model”

Goal: Dynasty 

Objective: Pass ownership to capable family members. 

Focus: Use valuation discounts to reduce estate tax exposure and align succession with a broader family wealth plan. 

This strategy preserves both the family name and the business legacy, often saving millions in future estate taxes through well-structured gifting and trust planning. 

4. Employee Stock Ownership Plan (ESOP) – “The Stewardship Model”

Goal: Perpetuation 

Objective: Provide broad ownership and align incentives. 

Focus: Leverage unique tax advantages and manage long-term liquidity obligations proactively. 

The ESOP structure allows owners to reward employees while maintaining continuity. According to the National Center for Employee Ownership (2021), employee-owners report 92% higher median household net worth and more than double the typical retirement balances of non-ESOP peers. 

“Employee ownership can be a powerful retention tool — and one of the most enduring ways to preserve culture.” 

Many ESOP founders choose perpetuation over price, creating companies where employees think and act like owners. But an ESOP’s long-term success depends on thoughtful design and proactive financial management—ensuring the structure remains a benefit, not a burden. 

5. Strategic Competitor Acquisition – “The Quick Exit Model”

Goal: Simplicity 

Objective: Exit swiftly to a larger player. 

Focus: Emphasize niche expertise, intellectual property, or regional dominance to attract buyers. 

This model suits owners ready to simplify their lives or capitalize on favorable market timing. The key is positioning your company as a strategic asset in a consolidating industry. 

The Dual Valuation Mindset 

Here’s the nuance that separates strategic owners from the rest: The value of your company depends on who the buyer is — and why you’re selling. 

Valuation for Liquidity (Private Equity): When selling to a third party, your goal is to maximize normalized EBITDA and highlight recurring revenue. Predictable profit drives higher multiples. 

Valuation for Succession (Family or Internal): When transferring ownership internally, the goal is tax efficiency. Legal valuation discounts — typically 20–40% — can significantly reduce gift and estate tax exposure while keeping ownership in trusted hands. 

The Political Discount: A Hidden Valuation Risk 

In the detention industry, we see an additional dynamic I call the Political Discount. 

External buyers must price in regulatory volatility and policy risk tied to large-scale government contracting. A shift in sentiment or funding priorities can compress multiples overnight.  

The solution? Build a financial fortress around your enterprise — solidifying profitability, diversification and capital reserves to withstand the political cycle. 

“In this industry, valuation isn’t only financial — it’s political.” 

The Legacy Case Study: Choosing 200 Years Over a Cashout 

At Pauly Jail Building Company, one of the industry’s oldest and most respected Detention Equipment Contractors, leadership recently faced a decision that reflects a crossroads many owners encounter: pursue a sale to a national consolidator or create an internal path for continuity. 

As President Joe Pohrer shared, the firm chose legacy over liquidity — prioritizing people and culture above the highest bid. By transitioning ownership to trusted leaders within the company, Pauly Jail reinforced the values that built its reputation over generations. 

“I’d rather build something that lasts 200 years than sell it for seven times EBITDA and see it vanish.” 

That mindset — viewing succession as a project in stewardship rather than an event in valuation — is what separates enduring firms from those that fade after transition.  

The Integrated Financial Project 

The journey from active owner to independent investor isn’t a transaction—it’s a decade-long project. 

You’re a specialist in your field; you deserve the same specialization in your financial life. At Monon Wealth Management, we begin by defining your destination — Legacy, Cash, or Employees — and build the integrated plan to get you there: from Exit Strategy to Tax Shield to Legacy Protection. 

“Don’t let the highest EBITDA multiple distract you from your deepest personal goals.” 

Darrick Hutchens is the Managing Partner of Monon Wealth Management, an independent fiduciary RIA serving entrepreneurs and business owners in the corrections construction industry. He specializes in helping owners align business value, tax efficiency, and personal legacy into one cohesive wealth strategy. 

 Next in the Series: The Corporate Shield: Three Tax and Liability Strategies to Protect Your Personal Wealth from Project Risk.