In this article, Hurst & Co Accountants offer some top tips and tricks to consider when planning your exit strategy. In the seven completed transactions we advised on in 2018, there were many ups and downs and difficult technical issues to deal with. Good preparation undoubtedly made things easier. We also saw a number of clients complete earn out periods post-completion. Here are some things you should consider when planning your exit strategy:
Take time pre-sale to meet others who have been through the process. Meet private equity investors and banks to fully understand different deal types - don’t dismiss an option you haven’t properly explored.
If there are a number of shareholders, be robust at the outset so that ground rules are clear and a small shareholder can’t disrupt the process.
Understand your financial requirements from a deal - take professional advice to understand what sum you need.
Be really clear about your personal requirements from a deal, beyond monetary terms. If you are prepared to stay involved, then be clear about what you are prepared to do. Owner managers always find it tough to work for other people and earn outs are not generally easy to be involved in.
The management team will get distracted during the process so therefore try to reduce this by using your advisers and limiting how many team members are deeply involved in the process. If you are doing forecasts, be realistic for the months of the sale process.
Ask your advisers to explain the different steps in the process so you understand what is involved and will be happening next. Ask for advice on difficult decisions - not just an explanation of the options.
Be prepared for endless due diligence and answering the same question multiple times!
Spend time getting to know the buyer so you understand what is important to them. You also need to understand their intentions for the business - if they aren’t deeply knowledgeable about your, sector make sure they have fully understood the business.
Have a strategy for informing stakeholders, employees, customers etc. As the deal gets closer, the more likely there will be rumours that you may have to respond to.
Take your time to reflect on the big decisions during the process.