Every business owner should have a detailed business plan with a comprehensive exit strategy. An exit strategy should clearly outline the business owner’s plan for a liquidity event or “cashing out” on the market value of their business at a designated point in time. The needs and goals of every business and business owner are unique; consequently, no two exit strategies may follow the same trajectory. It’s paramount that business owners have a trusted and experienced M&A Advisor explaining their options and detailing the processes for each type of transaction.
Exit strategies may include but are not limited to:
KEEPING YOUR BUSINESS IN THE FAMILY
May be in its entirety or partially; allowing for a continued say in the day-to-day operations of the business and the opportunity to groom your successor.
Your management team purchases the business; an opportunity for management to own an established and familiar business; enthusiastic about the business and its continued growth and success.
Sell all of the assets of the business; typically, must have valuable assets to sell, such as equipment or land, to make significant financial gains. May be the only option, or an opportunity for the owner to redirect the business; making it more attractive to potential buyers.
May sell to a strategic buyer looking for financial or operational synergies, or sell to a financial buyer, such as a private equity firm, that would like to grow the business and then seek an IPO or a later strategic exit.
AN IPO (INITIAL PUBLIC OFFERING)
Although not suitable for all businesses, an IPO may be an extremely profitable exit strategy for some business owners. Much of this depends on how the IPO is structured, and the potential limitations enacted post-offering to withdrawing capital.
The best exit strategy for a business owner is the one that meets their personal needs and goals. If cash is the driving force, a corporate divestiture or sale on the open market may be the best option. However, if carrying on one’s namesake and legacy are of the utmost importance, a management buyout or family succession plan may be most suitable. Most important to maximizing a company’s value is to choose a strategy and begin laying the groundwork for an exit well in advance. A trusted M&A Advisor will position a company for sale and capitalize on its strengths.