When a veteran hedge fund founder begins to contemplate retirement, he or she has choices to make about the nature of the firm to be left behind.  The previous installment in this two-part series on succession planning explored the issues surrounding one such choice: bequeathing the management firm as an independent entity to be wholly owned and led by a successor generation of firm principals.  This second installment addresses a different decision that a founder nearing retirement might make: selling the founder’s stake in the firm to an outside investor.  More specifically, this article touches on the following topics: reasons for selling a firm, finding a buyer, valuation issues, franchise protection (including strategies for retaining key employees), control rights (including veto rights), future rights to increase or decrease ownership (including exit opportunities for the remaining principals), fund documentation issues, other legal issues and investor relations issues.  In certain respects, these alternative choices have similar consequences and raise similar issues because each path is a way to institutionalize the manager’s business in conjunction with the founder’s exit.  Valuation of the founder’s interest, for example, will be a central concern in each scenario.  Post-closing retention incentives for the manager’s remaining talent is also a common theme, as are investor relations and fund documentation issues.  In other respects, however, a sale transaction differs significantly from an internal succession.  In the sale context, grooming and making visible a new internal leadership generation may not be as important; valuation will be negotiated with a third party and may be AUM-centric; and arrangements regarding post-closing control and ownership rights between the buyer and the remaining principals will loom large.  The authors of this article series are Scott C. Budlong, William Q. Orbe and Kenneth E. Werner, all partners Richards Kibbe & Orbe LLP.