Running a company comes with its fair share of day-to-day tasks, but just like we work to enjoy the moment, company leaders also must consider the future of the organization.
Much like retirement plans, your company’s exit also needs a strategic plan, and there is no better time to start than the present. There are a few options to ensure a seamless exit transition and, most importantly, to fulfill your vision post-exit.
If there’s any time to use a professional, it’s when you’re planning your company’s exit strategy. Cameron Herold, an author and leadership coach, states, “At some point, you will not be running the company you run today.”
What exit options do I have?
Before seeking out a professional, give yourself time to think about what selling the company means to you. What steps can you implement into your daily operations to help you achieve your personal goals in one, three, or even five years? Those strategies can help you envision and create your future beyond the sale. Vistage Research Center says, “Long before your sale, your advisor seeks to understand your post-sale financial and non-financial goals and prepare you to achieve those outcomes.” Beginning your exit planning as early as possible is the key to maximizing your company’s potential and ensuring successful business continuation post-exit.
Once you know what you want the company to accomplish alongside your personal goals, it’s best to understand what exit strategy would best fit those. A study from the middle market center cited,” Just three out of 10 middle market business owners want to retire post-transition. Almost as many—26%—want to continue working in the company indefinitely.” Let’s take a look at a few exiting options available.
ESOP(Employee Stock Ownership Plan): Does selling your company to an unfamiliar buyer go against the vision you built for your company? The good news is that it doesn’t have to be because employee stock ownership plans are becoming increasingly popular.” Research shows that employee-owned businesses outperform their competitors” (Ownership America 2023). Seeing the success you built within your company and continuing with those who helped shape it can be rewarding.
Strategic Buyer:
A buyer in this category is usually a competitor in the same industry. They are willing and able to pay a higher premium to acquire the business, providing value not only to the seller but also the opportunity to expand product lines and geographic markets. Strategic buyers usually aim to maintain the momentum of the business without imposing drastic change for both customers and, at times, employees. This option can offer options to protect employees while guaranteeing a high value in acquisition.
Financial Buyer:
If working in the company is a desire you wish to keep after the company transitions to a new seller, then having a financial buyer can allow for flexibility and even having top management remain in their positions. This flexibility is something most financial buyers encourage as they come from an investor role without all the knowledge of someone in that specific industry, such as a strategic buyer. There is no right or wrong answer, but having an M&A advisor such as our team at ACT can help you prepare for the transition and go through all the options that will help you see through the vision you created for your company’s exit.
Search Fund:
A search fund buyer can also be appealing as they seek to acquire lower to middle-market businesses. The goal is to increase the company’s value even further before selling the company again. The buyers would then become new management as they lead to an improvement in the company’s current financial value, which can take several years to complete. This new acquisition is a middle-term strategy and can significantly affect the employees and current management. If maximizing your company’s value is a personal goal post-sale, then this can offer you that vision.
Monetizing your life’s work is as important as deciding which exit strategy best suits your vision. To maximize your ROI, work with ACT Capital Advisors. At ACT, we select a team whose experience aligns with your sector to ensure we can address your concerns. For more recommendations, read our article on “7 Key Actions to Maximize Business Value.”
ACT Capital Advisors – We Sell Your Business to Empower Your Dreams
Founded in 1986, ACT Capital Advisors is a premier M&A advisory firm serving the lower to middle market. We specialize in sell-side and buy-side M&A, exit planning, and debt placement. Our Auction Process offers the best transaction price and terms when selling a business.
