Exit

Business Exit Strategy Planning

Have you considered how you’ll exit your business? We know that building a business can often be a lifetime of hard work and commitment. But properly exiting from your business is just as important as building it in the first place.

It is quite common for business owners to delay planning their exit strategy until they are ready personally. Putting a plan in place for exiting your business can ensure that your business is ready at the same time so that you can exit efficiently and drive value to meet or exceed your exit objectives/expectations.

CN Strategic Advisors are experts in dealing with business transactions and business strategy. We can advise you on every stage of your business exit, taking a long-term approach with you to exit at the right time.

If you’d like to speak to us, please don’t hesitate to get in touch and book an initial business strategy assessment.

Types Of Business Exit

A trade sale is when you sell your entire business to another company, usually in the same industry. One of the most common advantages of this type of exit is that you can potentially achieve a higher price if there is strategic value for the buyer. However, the process can be complex, and you may need to stay on for a transition period.

If you sell your business to a private equity investor, they will typically have funds available to you, allowing you to act quickly. However, like all investors, they will expect a return on their investment, which means they may push for changes to increase profitability.

A management buyout is when the existing management team buys the business. This can be a smooth transition because the buyers already understand the business.

An MBI is when an external management team buys the business. This brings in new perspectives and skills, but it may also introduce more risk because the new team may not be as familiar with the company’s operations.

Both an MBO and MBI typically requires external financing, which may also complicate the process.

An employee ownership trust (EOT) is where the business is sold to a trust set up for the benefit of all employees. The benefits of this option include potential tax advantages, maintaining the existing business culture, and a greater degree of continuity.

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How We Support Your Business Exit

Preparation for Sale

  • Work with you to understand your key drivers, timescales and valuation expectations for a transaction

  • Working with you, to identify strengths and business improvements to enhance value, including financial analysis of the business

  • Compile a plan with you to develop strengths / USPs and reduce business risks that can adversely impact value

Sector Research and Valuation Metrics

  • Provide you with insights regarding completed transactions within your sector and publicly available multiples

  • Financial appraisal of your business and indications of value

  • A summary of key drivers affecting valuations of businesses in your sector

Exit to a Competitor or Private Equity

  • Working with you to assess your ultimate objectives and personal goals

  • Compile sales memorandum and financial projections to highlight the strengths of the business and the opportunity

  • Map the market for potential interested parties

  • Approach an agreed long list/shortlist on your behalf

  • Present the sales information and negotiate interest on your behalf

  • Negotiate offer letters and create competitive tension to drive value

  • Project manage initial offer letter / Heads of Terms, Due diligence process and legal process through to successful completion

  • Commercial input to legal documents and advising on completion metrics and earn-out / deferred consideration

Speak to us

David Baggott

Managing Partner

Debt Advisory

Need to raise funding for your transaction?

Whether this is for an MBO, EOT or acquisition, our advisors can help raise the funds you need.

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Business Exit FAQs

The reason for exiting a business is different for each owner/entrepreneur.

For the majority of people, exiting your business is for value extraction purposes to be able to enjoy your future life in retirement or to pursue new opportunities (with a level of financial comfort behind you).

Alternatively, sometimes you receive an offer to buy your business that is too good to refuse, or you may have changes in your personal circumstances or health issues that require you to exit.

There are many exit options available that need careful assessment to ensure they fit with your goals and future plans. For instance, selling to a competitor may yield a higher value than a Management Buyout (“MBO”), but a MBO may provide more protection for your workforce and ‘reward’ key employees who have helped you along your journey of business ownership.

Typical exit options include selling the business, passing it on to family via gifting shares or through a Family buyout, a Management buyout, Private Equity investment or an Employee Ownership Trust.

Your own ultimate exit timeframe, the type of business, the industry in which you operate, as well as amount of value extraction required will all impact on which option best fits with you.

Valuing a business can be a complex process and requires a detailed analysis of your business, operations, financials, industry and external market factors. Calculating the most appropriate basis of valuation can depend on many factors – some of the more common methods are market-based comparatives including multiples of maintainable profits, comparable transactions, levels of net assets in the business, and discounted cash flows based on future forecasts and expected cash flows.

Ultimately, the value of a business is agreed between a willing buyer and a willing seller. If you’d like to get a more accurate valuation of your business, or you are looking to assess whether an offer you have received is fair and appropriate, don’t hesitate to get in touch with CN Strategic Advisors to provide you with our experienced assessment and strategic advice.

The timing of an exit depends on several factors, including the businesses position and performance, market conditions including industry trends and economic factors, and importantly your own personal circumstances, aims and objectives.

It’s crucial to work with advisors to understand the exit options available to you and appropriately plan to successfully deliver the right option for you at the right time for both you and the business.

Mergers & Acquisitions are complex transactions – both you (as an owner), and the business need to be ready. An M&A process will likely include detailed Due Diligence on many areas of your business including financials, operations, legal documents and commercial aspects.

It’s advisable to seek guidance from CN Strategic Advisors well before you wish to exit your business so they can work with you to assess the best exit option for you, to analyse whether the value of the business is in line with your exit requirements, and then to put the foundations in place to prepare for, and subsequently deliver a successful transaction.

As a business owner, you will be well aware of your main competitors and larger players within your industry who could be a buyer. A Corporate Finance advisor like CN Strategic Advisors will assess these parties with you and also work with you to research your market and complimentary sectors to identify appropriate buyers (that also have the resources or previous experience to complete acquisitions).

The typical approach is then to either approach these parties directly or conduct a wider marketing process to share a confidential teaser summarising the business to a larger audience.

As part of CN Strategic advisors’ approach, we will explain the pros and cons of different marketing approaches and progress the most appropriate method for you – many of our clients prefer a ‘discreet process’, so that a shortlist of appropriate buyers are approached directly by us to maintain confidentiality.

During initial discussions, it is important to ensure you carefully consider the information you share with a buyer and at which stage of the process you do so.

CN Strategic Advisors can advise you throughout the process to ensure you are sharing an appropriate amount of information and that it highlights the business in the best way. As part of a controlled and efficient sales process we will assist with compiling the relevant information such as a sales memorandum which will detail a background to the business, and position in the best way to highlight synergies and opportunities to drive and enhance value.

It is also worthwhile entering into a Non-Disclosure Agreement (“NDA”) prior to sharing information to protect confidentiality.

There are many legal aspects to consider as part of exiting a business. The potential buyer or investor will likely conduct Due Diligence across all key legal documents and contracts within your business to assess for risks and potential liabilities. This can include contracts such as those with customers, suppliers, employees and regulatory compliance.

In addition, there are complex legal documents drawn up, negotiated and agreed as part of selling shares between two parties, such as a Share Purchase Agreement (“SPA”), which will cover the key terms of the acquisition of the business and include key legal protections such as warranties and indemnities.

It is important to ensure you work with good corporate lawyers as part of an M&A transaction such as a sale of shares. CN Strategic Advisors have worked with many different lawyers that we can introduce as appropriate.

Exiting a business has tax implications, and it’s crucial to understand the tax consequences of the chosen exit strategy. Our tax advisors as part of the wider CN group can outline all your tax considerations and help to optimise the financial aspects of your exit.

You should be thinking about ‘what next?’ far in advance of an exit event. At an early stage, it is important to assess your personal financial position and how the value extracted will be spent/invested to ensure it can support your plans. For instance, if this is a retirement sale, will the cash extracted enable you to continue to live the lifestyle you want and protect your family and its wealth, all without having to re-enter work?

As many exits include non-compete clauses, if you are not looking to retire, you need to carefully think about your future plans/career as you may be unable to continue to work within the same industry (which is what you will know best).