exiting your business
DESCRIPTION
Here is a class I gave to business owners about exiting their businesses.TRANSCRIPT
PREPARING FOR YOUR EXITMatt Register
Principal
George Walden
Principal
Legal Notice
• This is not an offer to sell or a solicitation of an offer to buy securities.
• Securities are offered through Corporate Finance Securities, Inc.
• Corporate Finance Securities, Inc. is a member firm of FINRA and SIPC.
What are your options?
Not selling0% sale Selling
100% sale
What are your options?
Not selling0% sale Selling
100% sale
PartialSale
MinorityRecap
JointVenture ESOP
ManagementBuyout
What is success?• Full retirement?• Continued consulting?• Continue to run the business?• Transfer to the next generation?
Future Funding Needs
Wealth
Lifestyle
Charity Family
Future Business
Opportunities
WHAT IS YOUR NUMBER?
Who would buy your company?
Strategic• Usually not looking for partners• Your business solves a problem• Different math
Financial• Looking for return• Not interested in running a
business• Needs management team in
place
WHAT DO YOU REALLY CARE ABOUT?
Maximizing Value• Well document deal• Proven earnings• Replicable results• Growth potential / Scalability• Synergies• Minimize buyer risk
Minimize Buyer Risk• Audited financials
• Provable• Manage for taxes, but prove earnings
• Bench strength• Redundancy • Sustainability
• Systems in place• Less reliance on personality• More systems
Pre-transaction Planning• Legal
• Trusts• Non-profits• Gifts
• Wealth Management• Determining your number
• Strategic• Right business• Right clients
• HR• Knowledge management• Depth of leadership
The Cost of No Plan• Value of business• Risk to buyer• Stress for family• Uncertainty for customers• Uncertainty for employees• Uncertainty for vendors• Fewer options / Less control
Example 1
• Contract Machining• OEM Drilling equipment
• $16MM rev• Proven earnings• Management Team• Synergies with buyer
• Contract Machining• OEM Drilling equipment
• $5MM rev• Run on a “yellow legal pad”
• Customer concentration
• No plan• No team• No time
Company A Company B
Example 1
• 5 X EBITDA • 3 X EBITDA
Company A Company B
Example 2• $35MM in revenue• Out of favor industry• Non-standard business model• Very profitable• Limited interest from buyers
Example 3• $35MM rev• Well run / depth / systems• Solved a buyer problem
Example 3• 5.5 X EBITDA
Example 4• $30MM rev• Son is victim of own success• Asset light company
Example 4• Minority recap• Father retains some equity• Son gifted equity• Son earns equity from PEG
Company
PEG 45%
Father 25%
Son 30%
Your Transaction Team• Investment Bank
• Run an efficient auction• Generate interest• Negotiation
• Tax Accountant• Attorney
• Reps and warrantees• Contracts
• Insurance• Legacy liability coverage
• Wealth Manager• Make money with money
