Plan, achieve, exit

07 February 2011

You’ve built your business and stuck with it through good and bad times, but what happens when you want to move on? How do you benefit from all that hard work?

William Barletta, director and Christopher Evans, senior associate from the commercial team at Swansea-based solicitors, Morgan LaRoche consider how best to maximise the value of your business and importantly, your return when you want to exit your investment.

“It might seem strange to think about exiting when you’re just starting up, but start as you mean to go on is my advice! Your exit strategy should be a key part of your business plan from the start - it’s the one thing that will align it with your personal plans and ensure you reap the rewards of your hard work,” Barletta explains.

Your business plan will need to take account of many issues and should reflect your personal exit strategy if you’re to achieve the best returns. So which exit option should you plan for and which one could realise the best return? Evans offers his view on some potential options:

Trade sales

Selling the business is the common option favoured by business owners. You’ll need to plan ahead for a smooth sale. Potential buyers will want to examine it in detail and conduct thorough due diligence. Don’t forget that any contract will usually contain warranties.

Management buy-outs and buy-ins (MBOs and MBIs)

An MBO by existing managers is often favoured by business owners and can result in a smooth sale given that some potential purchasers may already hold a minority interest in the business. Alternatively, selling the business to new managers who have experience in the same sector is another option to consider.

Keep it in the family

Family-owned businesses often pass from one generation to another. Agreements between the owners (e.g. shareholders’ agreements) are crucial here. They can facilitate a smooth transition, clarify future business operation and importantly, help you remain a happy family!

Flotation

If you have a high-growth business, flotation is a serious option. Plan ahead and plan carefully as investors and professionals overseeing the flotation process will conduct robust due diligence into the business.

Venture capital (VC) investment

Venture capital is another option for high-growth businesses in need of an injection of capital and expertise to
grow. VCs often invest in high-growth businesses in high-tech sectors and take a hands-on management role.
“Any investor looks for a good return and without doubt a carefully thought-through exit strategy is the best way to achieve this, but you need to plan for and work towards your exit strategy right from the start,” Barletta concludes.

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