For entrepreneurs and business owners, an exit strategy is your endgame – your way out of the company you have worked so hard to build up, whether that means the business carries on without you or not.
Whatever your reasons for wanting out – retirement, the desire to cash in while the going is good or a hunger to take on new ventures, it is always important to have a clear strategy in mind. It is nigh on impossible for any business owner to wake up one day, decide they want out and then expect to get good value for their stake. Leaving your own business in a satisfactory manner takes some forward planning.
So when you start to consider how you will get out, what are the options before you? Let’s take a look at the main ones.
Strategic acquisition of your business
These transactions usually involve businesses with the assets, history and future prospects to attract either a competitor or another business looking to enter a new market. They can be highly profitable for the seller, but the key is to get the business into a strong enough position to attract interest in the first place.
Management buy out
If your business has grown to the point where the management team making the day-to-day decisions is now distinct from the owner, it may be possible to sell the company to them. Management teams can be keen to take over ownership so they can exercise more strategic control and reap the rewards of strong performance more directly. Raising the capital to achieve the buyout can be achieved if the vendor and external funders believe in the future plans of the management team.
Sale to co-owners
If you co-own a business with one or more business partners, one of the most straightforward exit options is to sell your stake to them. The main elements are similar to a management buy out.
Flotation on a stock market
Most commonly seen with larger companies, flotations are the mechanism which takes a private company into public ownership. A share issue makes stakes in the business available for purchase on the open market, with an executive team maintaining control of operations on behalf of the shareholders. These can be very profitable for a business owner looking to realise value from their enterprise, although the process is long and complicated.
Liquidation or closure
Most of the options we have looked at above assume that your business is in a strong and stable position as you plan your exit. Sometimes, the opposite is true, and indeed it might be the parlous nature of a company’s fortunes which drive an owner to seek a way out. It ensures all debts are cancelled after whatever remains of the company’s assets are divided up between creditors.
Ultimately, the best thing business owners can do when looking at exit options is to consult a professional advisor. These are the people that will have the knowledge and experience to guide you through the right process.
It’s always recommended to consult your advisor early in the process as it can sometimes take years to exit a business if the right procedures aren’t in place early on. Again this is something your advisor can guide you through.
Speak to an expert
The team at KJG share many years’ experience on all of the above options. If you would like to have a no obligation chat simply call on 0161 832 6221, or email our Corporate Finance Partner direct on firstname.lastname@example.org.