How to Effectively Plan Your Exit Strategy

What is an exit strategy?

An Exit Strategy relates to a strategic plan outlining the means by which the owner(s) of a business can reduce or dispose of their stake in that company.

Amongst other considerations, this plan should cover:

• When to exit.
• How to exit.
• What the legacy might look like.
• Is the future of the business secure?
• Who might be the best potential buyers?
• How to achieve maximum value.

There are a number of options available to business owners. Choosing the most appropriate strategy will depend on:

• The nature of the business and the sector in which it operates.
• The financial performance of the business.
• The dynamics of the ownership and leadership teams.
• Overall economic climate.
• The availability of finance.

What are the options available to you?

Whilst not exhaustive, some of the options available include:

• Sale of the business to a third party – either a trade buyer or financial investor. This is a common option for SMEs.
• Sale of the business to employees (Management Buy-Out).
• Sale of the business to a family member(s).
• Employee ownership – selling or gifting shares in the business to an employee-owned trust.
• Initial Public Offering – offering shares to the public via a listing of the business on a stock exchange. This option is less common for SMEs.

Why create an exit strategy?

Having a well-defined exit strategy can be beneficial to business owners and other stakeholders such as lenders and/or investors for many reasons. This includes, but is not limited to:

• Maximising shareholder value.
• Personal tax planning.
• Providing control over when to exit.
• Securing the future for the business.
• Incentivising and retaining top talent and employees.
• Making sure legal and due diligence considerations are addressed (these can impact value).
• Reducing the time to exit.

When should you consider an exit strategy?

It is never too early to begin planning your exit strategy. Although it may seem unusual to pre-empt your departure, we would usually recommend formulating your exit strategy at least 12-24 months prior to beginning the exit process. This ensures that the business is prepared for sale and there is a focus on the areas which are likely to be key value drivers for buyers. A trade disposal process can typically take anywhere from 6 months to a year.

Start planning your exit strategy now

At DTE Corporate Finance we have extensive experience in formulating and executing exit strategies. Our team has acted on many transactions in a variety of sectors and at a large range of valuations.

Whilst every transaction is unique, our experience of completing transactions over the years means we have the expertise required to work with you on developing an exit strategy. This is tailored specifically to you and your business requirements.

To learn more about how we can help, our corporate finance team are offering a shareholder review session. If this is of interest to you, please get in touch.

We also work closely with our tax team to prepare tax-efficient strategies for business owners and maximise realisations.

If you are interested in discussing which options may be available to you, either now or in the future, please contact us on 0161 819 1910 or [email protected].

Author – Ben Fallows