Exits: how will you and your investors reap the rewards

It’s never too early to start planning for the sale of your business. But, it can be too late. A perceived lack of company exits is a common issue with most if not all investors; they are constantly striving to drive earlier exits, therefore understanding this process is vital in order to unlock value.

Key steps to maximise value

•A strong, motivated management team — Motivating and retaining top talent is crucial for the sale value of your company.

•Recurring quality revenue and multiple streams of revenue — the larger the portion of a company’s revenue that is from blue chip customers, recurring, stable, and likely to continue in the future, the more desirable that company is to prospective buyers.

•Customer diversification — building a diversified customer base is critically important.

•Realistic strategic growth plan and scalability — how will your business get to the next level? Buyers are interested in the future, so having a realistic plan that demonstrates the potential for growth and profitability for your business is important.

•Financial systems and controls that can withstand due diligence — the quality of your systems and of your financial information can have a huge impact on the sale of your business.

Exit planning

Early planning allows you, and your corporate finance advisers, to create a strategy to generate the outcomes you want. Key points to consider include timeframe to exit, expectations of value vs company collateral, likely exit routes (eg strategic, trade or financial acquirers) and optimal size/time for exit to maximise value and acquirer appeal. In our experience, it pays for businesses at an immediate pre-exit stage to work hard on building their profile within their own and adjacent industries. We see this as being primarily about building confidence with potential acquirers, who will be ever mindful of the fear factors surrounding a potential acquisition. If you can demonstrate to them that your business is a market leader (or will be) which drives market opinion, then you will have gone a long way in terms of allaying these fears; importantly, this will assist in maximising value and/or minimising price erosion during the negotiation phase.

John P Craig CA
Director DC Consulting
Contact: (01382 339391)
or Angus Hay (01382 339292)
www.dcconsult.co.uk