Lots of people will give you advice on the best way to exit your business, but the most valuable – and most accurate – information comes from someone who has been it, seen it, done it and written the slogan for the T-shirt.
Award winning entrepreneur George Yule shared his experiences at a recent Focus Dinner on Exiting Your Business, and he’s given us permission to share the highlights here.
George gave very detailed advice about the process of an exit, the why and the how, but just as important were his messages: “don’t hang about” and “enjoy the journey”.
Identifying the reason for exit comes first, whether its retirement, distress or a new venture, closely followed by establishing owner-expectations on the price and schedule, the remit and the main objectives of exit process, as these will have a bearing on your scope, schedule and position of strength (or not).
Take into account any influencing factors such as overall market conditions, the likely acquirers e.g. trade and/or private equity, and the strengths and weaknesses within the seller’s business.
And prepare a detailed Exit Action Plan that identifies what needs to be done internally (address ALL known weaknesses/ gaps – this includes process, systems and people!) and externally (meet and engage best-in-class deal advisors at the appropriate time i.e. not too late – or too soon as their fees will be worth the additional premium).
George emphasised the importance of this for the seller, as the exit process will place significant demands on you and your management team throughout the process at a time when you both need your own business to be performing at its best because >EBITDA = >£ Enterprise value
Ensure the Plan has defined activities, such as visible work-scope, milestones, roles and responsibilities, schedule, plan v, actual measurement of progress, etc. And be sure to clearly define and communicate the plan and process to the various action parties.
It’s key to assess how you can motivate other members of the management team and key staff to take ownership of project and its successful outcome e.g. ££’s bonus, equity options via EBT / EMI, senior future management opportunities, etc.
In George’s last project, he ran a sale process with five serious bidders that commenced in November and concluded the following May. He shared the detail of the stages he and his team went through to complete the deal:
• Issue sale ‘teaser’ / flyer to broad list of potential acquirers
• Deal advisor screens replies to teaser to establish short list of serious parties
• Compile data room & management presentation
• Round of direct meetings / presentations with bidders & allow access to data room
• 1st round of bids received, screened and lowest bidders given option to drop out or re-bid
• 2nd round of meetings with management, site/ facility visits, 1-2-1 discussions with CEO/MD
• 2nd round of [increased] bids received, screened and selection of top 2-3 bidders
• Further round of meetings with bidders, Q+A’s, 1-2-1 discussions / assess ‘chemistry’
• Another round of bids received and preferred / final bidders [2] identified to meet again
• Closing date identified to bidders for closing bids, successful bidder identified
• Exclusivity allocated pending completion of due diligence [in this case 6weeks allowed]
• Management team of seller exposed to financial, commercial, legal, technical Q+A
• Diligence completed / deal done
Asked what he saw as the main learning points, George said there were many, but namely: be prescriptive about self-diligence before meeting any bidders, ensure buy in from key staff, know your business, your market, your clients, your USPs and look for scalability, quality of earnings and sustainability.
Take EVERY opportunity to increase EBITDA during the sale process, seek specific client testimonials and references, prepare meaningful management presentation and rehearse religiously the Q+A process with senior management before meeting with bidders.
George said it’s key to exude confidence and competency when presenting your business to potential bidders and to ensure you get clear of being on critical path during the diligence period by providing concise responses to diligence advisors acting for bidder.
And appoint a deal maker with a proven track record, work closely with them throughout the process – they will be the ones who deliver the prize.
Ultimately, don’t hang about – drive the sale process and diligence on an on-going basis until completion. If you are seriously considering an exit, allow preparation time of around 18-24months from the outset to ensure all of the above tasks and other relevant actions such as PR profile, strong branding, visibility and building a data room of quality company information are included on your list of to-dos.
And finally, enjoy the journey keep a sense of perspective and remain focused on getting through the seeming endless questions and requests for information by potential acquirers and their advisors – they’ve an insatiable appetite for detail.
For more information about George, biog here
