As an owner, entrepreneur, a CEO or an executive board member, day-to-day business consumes so much energy it is often difficult to contemplate that one-day it will come to an end. When this day comes, are you ready to realise the full value of this investment of time and money in the business? It is critical that an exit strategy is prepared well in advance.
A business will provide income while you work in the business, but it is also a huge potential source of funds when you leave. How and when you exit can be one of the most important financial decisions that you make. Many people also find in retrospect that it is one of the most emotionally draining, time consuming and stressful periods in their business life. However successful you have been it is unlikely that you have been through this process many times, if ever before.
The exit is often unexpected arising from an unsolicited offer, a major conflict between the owners, ill health or a change in family circumstances. It may be that it isn't fun any more; your priorities have changed; it is time to realise some capital or retirement looms.
What is critical is the recognition that the exit needs to be a structured process like any other business process. It has to be given the required time and planned well in advance. Once the decision has been made, it is unusual to conclude an exit in less than six months. If a decision to sell the business has been made the state of the business and the market is important; ideally the timing should be optimised in order to obtain the best price.
When investors and venture capitalists invest into businesses one of the key aspects of the appraisal is the exit strategy. It is also recognised that grooming the business is necessary to maximise the value.
When grooming a business for a sale it is important to maximise the brand or identity of the business in the market, have built a track record and have looked at fiscal results from a buyer's perspective. A potential buyer will be looking at their return on their investment.
An investor or buyer will analyse the ability to carry on the business, which probably will not include you, and will have to ensure that the business has the appropriate management structure and incentives to continue. The time to eliminate skeletons in the cupboard or to restructure is before the due diligence process takes place.
An exit process will normally involve the following actions:
assessment of the likely value
possible structure and timing of the sale
research and identification of potential buyers
generation of a buyers information pack
examination of due diligence issues
examination of intellectual property issues
identification of any necessary business restructuring
identification of negotiation process
pre-sale confidentiality and heads of agreement documentation
structure of the deal
taxation planning
Use of good advisors can increase the net value of the sale, ensure maximum benefit to you and take some of the emotion and stress from the process. Good advisors will have been through this process many more times than you have.
It is essential that the time and effort of the exit does not overly distract you from the day-to-day business or there may not be a business to sell or you may be so financially over committed that you have to sell in a buyers market. Don't give away more business intelligence than is necessary to conclude the sale. Remember that the communication of the sale must be handled sensitively internally and externally so as not to adversely impact employees and customers. Ensure that you always take as much cash as possible.
The purpose of this article is to be thought provoking. In itself it answers a few questions, as each business is different. It is our intention to run a workshop in the spring to go into more detail and try and identify how we may be able to help you and you may help yourselves!
Please e-mail kathy@nunn-hayward.com if you would like to be sent an invitation. There will be no charge for the seminar but it may be the best few hours you will ever invest!
Nunn Hayward - Business Recovery and Insolvency Department
It is now even more convenient to contact our Business Recovery and Insolvency Department.
A new free-phone number has been introduced to cover all four offices. Ring 0800 5870918 to access specialist business recovery and insolvency advice. |
Please contact us to discuss the above further
Tel: 01753 888211 Fax: 01753 889669 Email: abacus@nunn-hayward.com
Nunn Hayward, Sterling House, 20 Station Road, Gerrards Cross, Bucks SL9 8EL. |
Registered Auditors, Licensed Insolvency Practitioners and authorised to carry on investment business by the Institute of Chartered Accountants in England and Wales.
This publication has been prepared as a guide only to topics of current financial and business interest. No responsibility for loss occasioned to any person acting or refraining from acting as a result of any material in this publication can be accepted by us. All rights reserved.
If you would like to subscribe to future editions of the Abacus Newsletter then please e-mail your name and address and we will add you to our mailing list.
