Exit strategies for Irish entrepreneurs and business owners Having worked hard to build a successful company and create a legacy, selling a business can be a highstakes, emotional event for entrepreneurs and private business owners. How can you ensure a well-structured and well-executed exit process? Selling a business can be one of the toughest decisions of an entrepreneur’s working life. However, planning your exit can give you control over your destiny – and that of your business. Interestingly, despite economic headwinds and the impact of the pandemic on all of our lives and businesses, corporate and private equity investors now have unprecedented access to capital for potential deals. As business valuations increase, the expectations placed on businesses being sold become more onerous - and unwanted surprises in a deal become more costly. Sellers need to give buyers confidence in their intent and ability to move transactions towards a successful and timely conclusion. Proactive preparation has become paramount. Processes have accelerated and become more data and technology driven. Quality of earnings analyses and the due diligence process are becoming more extensive and intrusive. A well-structured exit process has five distinct phases: MAKING THE DECISION TO SELL:
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It is important to identify both the business and personal goals for selling your business, monetary and other. Objectives will be both financial (e.g., liquidity, valuation, tax/estate planning) and non-financial (e.g., succession, employee and other stakeholder concerns, family dynamics). To a large extent, these considerations will determine the appropriate exit strategy. Being proactive at the outset empowers you to assert more control over the process and the ability to strike when the time is right. It also enhances the eventual value of the business to buyers. UNDERSTANDING THE BUYER UNIVERSE: One of the smartest moves you can make to sharpen your message to the market is to look at your business through the eyes of a buyer. Are you going to maintain a continuing role in the business? What are the buyers’
expectations about control? Can you determine the appropriate transaction structure and reconcile both the buyer and seller objectives? The earlier you step back from the ‘coal face’ and study the business anew, the more time you have to make substantive changes that can add real value. The different ways in which buyers will drive value in your business after closing the deal may not loom large to you now, but they could play out in ways that leave you with very different options when it comes to exiting. PREPARING THE BUSINESS FOR A SALE: Among the key actions required when preparing your business for sale are: •
Conducting a pre-sale health check and taking corrective actions – is your business ready for sale?
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Considering due diligence preparations.
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Putting together the best package to present to buyers.
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Valuing and evaluating the business, including price expectations.
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Determining the right time to sell.
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Pre-emptively addressing potential buyer concerns.
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Managing employee expectations and putting in place appropriate retention packages in the transaction setting.
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Turning complexity into confidence.
THE DEAL PROCESS: You have made the decision to sell. You have considered the possible types of buyers and the type of sale that will work well for you and your business. You have considered the value of the business and geared up for the sale process, building the package and key messages to present to the market. Now you are ready to approach potential buyers and begin the actual sale process. PREPARING FOR LIFE AFTER THE DEAL: How are you going to enjoy, preserve, and ultimately transfer the wealth generated by the sale of your business? There are multiple estate, tax planning and investment considerations to address. It is important to recognise that managing wealth effectively is not too dissimilar to running a business. You will have many alternatives for preserving wealth for the long term, in the most taxefficient manner possible. Remember, the great deals are those where “the best is yet to come” for the sellers, the buyers, and the business – and advance planning will have a major impact on a successful outcome for all.
