“There are few universal truths in business life. This is one. You will leave your business.
John H. Brown, CEO, Business Enterprise Institute Inc.
Transitioning a business is not simple. It is not as simple as selling the family home. If you get it wrong there can be dire financial consequences and unnecessary stress for you and your shareholders.
A successful transition requires careful planning as the actual exit strategy will depend on which of the 8 alternatives the owner chooses; see the 8 alternatives below.
Careful transition planning will maximise the proceeds of sale, minimise taxes, hence maximise after-tax proceeds and minimise the personal stress involved in the business transition process.
What we do is work with all shareholders and crystallise their respective transition objectives – including departure date, income required after departure and to whom they want to transition.
We also select other professional service providers required to transition the business effectively and efficiently – legal and accounting professionals who excel at transitions, not necessarily the company’s accountant or lawyer. We manage these service providers over the course of the transition using our cloud-based exit management software platform.
Many buyers do transitions for a living. Owners don’t. We often step in between owner and buyer to negotiate a win-win, not a win-lose. In one project, the buyer had an internal team of M&A specialists who would have had the owners on toast. Our negotiation resulted in a 7 times earnings valuation for the client.
Following are the 8 main transition alternatives:
- Trade Sale
- Family Transfer
- Management Buyout
- Hiring Professional Management
- Employee Share Ownership
- Initial Public Offering