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Want out? Mapping an effective business exit and avoiding deal fatigue

Written by: Adrian Chugg on Wednesday, 5 December 2018

So you’ve reached the point where you want to exit your business.

But what is the best route to the door?

There are various options for business owners to consider when it’s time to sell and each comes with a range of pros and cons of which to be aware.

It’s not simply a matter of money. Other aspects such as the preferred buyer’s profile, objectives and culture, staff prospects, your own involvement in the future business as well as taxation considerations all will likely come into play.

Many business owners prefer to consider all possibilities, welcome all offers and then work through a process of elimination.

While this can bring a variety of options to the table, it can also become a lengthy and costly process. This is also where deal fatigue has the potential to set in as sellers are gradually worn down during a protracted process with the risk of ultimately succumbing to an inferior offer.

Does your exit path match your personal goals?

In our experience it’s important to identify the key objectives of the exiting business owner from the outset. That way the most appropriate exit strategies can be identified, focussed on and pursued without unnecessary distraction. 

These may include:

100% sale

One of the most popular exit plans is to sell 100% of the business to a strategic buyer such as a competitor supplier or customer. This allows for a full and clear exit from the business. However we are seeing more buyers seeking a staged sale where say 50% of the sale price is paid up front with the remaining 50% settled at a later date once certain agreed parameters are met.

Partial sale or merger

It may be more appropriate to pursue a partial divestment (either a minority or majority stake) to a strategic investor or private equity partner. For example, in South Australia there is increased demand from local and interstate-based private equity firms. This option may also involve a merger with a counter party and usually comes with the owner’s commitment to ongoing involvement in the business for an agreed period of time.

Listing

Floating on the Australian Stock Exchange as a listed company may or may not be a suitable option depending on the nature, financial stature and scale of the business. There are of course a range of additional rules and responsibilities as well as costs that come with a public float that need to be carefully considered and balanced up against the benefits such as access to capital and ultimate price/value received.

Casting the net for buyers

In assessing the most appropriate strategy it’s important to identify the range of potential buyers. This may include:

  • Existing business relations through suppliers and customers
  • Similar interstate and international businesses wishing to expand geographically
  • Businesses providing similar products and services but focussing on different customer segments
  • Direct and indirect competitors subject to a level of confidentiality you wish to maintain.

It’s vital to engage a trusted business advisor early in the planning process, someone with experience across both sides of corporate transactions and who understands the market. Such an advisor can help the business owner navigate the most effective path to an exit that best meets his or her goals.

 

Our 2018/19 Exit Smart Survey is now open! Assessing the exit readiness of businesses across Australia and New Zealand, don’t miss your chance to share your thoughts and help us build a stronger private business sector.  Click here to participate.

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