Why define your exit goals well ahead of a transaction?

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There are many ways you can end up selling 100% of your firm, or some of your stake in it, but will the end result fulfill the things most important to you and yours? If you haven’t identified your goals, then the shape of the deal you ultimately sign may cause great future regret. “If only I’d done this or that” will forever be a thought imprinted in your mind. So the purpose of this blog is to help you formulate your goals by identifying typical owner aspirations. If you do this, then the route-map to the transaction and the terms you sign are more likely to deliver the rewards you want. You only usually get one shot at building a business and selling it, with significant life changing outcomes, so the sooner you define your exit goals, even years ahead of a deal, the better.

Let’s start by categorizing typical aspirations. In the table below there is a simple model to assist in the initial formulation of your goals.

Aspirations

Your aspirations may be simple, for example:

Price is everything, I just want the highest price I can get as soon as possible.

Or it may be a blend:

We want the best deal, but immediate exit for majority shareholders is important, we would trade price for the right buyer and exit terms. The right buyer is important because after our exit we want our former colleagues to do very well.

In following blogs we will cover each of the goals and aspirations in more detail and identify the considerations for each in planning ahead for a sale. Individually and together they require different plans and approaches to achieve the outcomes you want, such as:

  • Designing the business to be attractive to the ideal new home
  • Optimizing the timing of a sale and process approach to maximize the price
  • Designing yourself out of the business at least a year ahead of a sale
  • Planning for an MBO rather than trade sale to enable legacy continuation
  • Planning for a sale to a financial buyer to enable a flexible deal that provides both cash and ownership continuation.

In summary, if you don’t plan ahead, your goals are unlikely to happen by accident and you will accept the first unsolicited buyer approach that comes your way, without knowing how good or bad a deal it is! If you do it by design, then you can control the results.

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