Exit strategies
Business owners who are at the point of exit, or approaching exit, normally have a clear motivation supporting their intention to realise the desired value in their business. This is often caused by catalysts such as age, change in personal circumstances or an unsolicited approach from a potential buyer.
Of course, where a business is owned by more than one owner and the business is to be sold as a whole as a going concern there will need to be unanimity among the owners. At this stage, involvement of external experts to advise on maximising the value to be realised, including tax and personal financial planning, tend to be key to success.
Business owners at the point of exit should be evaluating the various options including trade sale, management buy out or perhaps even an initial public offering. They should also be very focused on dealing with issues that may impede or reduce the value on exit, managing these matters very carefully prior to exit to maximise exit value.
We also find that, what we describe as lifestyle businesses, where the success of the business is very reliant on the efforts of the owner who is instrumental in the creation of profitability and value, realise much less value on exit than those businesses that have grown and matured effectively where a strong management team, established products, services and customers, allow the business to stand alone without the owner.
Of course, the economic conditions at the time, and in particular the availability and cost of capital, can have a tremendous effect on both the availability of potential buyers and the price they are prepared to pay. Timing of any sale is therefore critical to maximising value.
As the existing party, you need to know that the value of the business on exit will satisfy your financial planning requirements and that you are aware of the range of options for tax planning to maximise the proceeds net of tax. You also need to be happy that the exit process will produce the best results, including competitive bids, for your business and minimal earn outs or conditional consideration. Finally on a personal note you will need to decide what your plans on exit will be. Will you retire or will you reinvest the proceeds in another business? Or do you intend to distribute part of the proceeds to your family?
At Samuels Financial we can work with you to ensure you negotiate the optimum sale conditions and develop a comprehensive exit planning strategy for you. Speak to one of our corporate advisers to find out more.
This service is separate and distinct to those offered as a representative of the St. James's Place Partnership.
