Services services Planning and Exit Strategy Advice

Overview

The likelihood of a successful sale of a business and the achievement of a higher price or more attractive deal structure can be significantly increased with the right longer term planning. We are often appointed by a client several years before the formal sale process is launched, to advise on key positioning issues. This also has the added advantage that we know the company, and its shareholders, well by the time the marketing process commences – after all, you can sell much more effectively if you have an intimate knowledge of the company and people behind it.

Long Term Preparation

Whether it is part of an overall exit strategy, or to ensure you can react to an unsolicited approach, have a clear view of:

  • Your personal objectives or, if a group, the group’s strategic direction.

  • How to reduce the reliance of the business on you by developing and strengthening the management team.

  • The company growth curve – do not leave it too late!

  • The positioning of the business in market segments and product/service offerings to make it as attractive to as many buyers as possible.

  • How to develop internal systems/financial reporting to provide quality information.

  • How to implement a tax advantageous structure

Succession Corporate Finance advises on all these issues. It typically takes six to nine months to sell a business, and with the majority of owner managed businesses, there may be an earn-out period of between one and three years. It can take between six months and two years to position a business for an exit.

When should you consider Succession planning?

Ideally the thinking on how to exit a business should be started the moment the business is founded or acquired. This is perhaps easier said than done. However, bear in mind the following practical points:

  • It typically takes six to nine months to sell a business if one undertakes a properly structured auction

  • If the vendor is perceived to be key to the company, a purchaser is likely to ask the vendor to remain in the business with some of the consideration dependent on that involvement and contingent on the future financial performance of the business. This can range from anything as short as six months to five years but mostly it is between one and two years

  • If the company needs to be re-positioned in the market place or the management team strengthened, this can take up to two years before exit.

Therefore, it can be as long as five years from the date the vendors first consider exiting the business until the vendor can actually walk away. In addition, there are several ways to exit a business, including a trade sale, sale to management (MBO/MBI), flotation and sale of a minority stake, so it is important to consider the most likely or suitable of these options as well. Click here for more information on exit options.

As a result, it is never too early to have a confidential discussion with a corporate finance adviser. We have been involved with businesses many years before the exit and we have had occasions where the vendors have received unsolicited approaches shortly after the initial confidential exploratory meeting and a transaction has been completed within three months.

For more information on exit strategy and Succession planning, please contact us