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Planning your Exit Strategy

5 February 2020
Lewis Pearson DTE Business Advisers

by Lewis Pearson, Corporate Finance Executive

What is an Exit Strategy?

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

chess board exit strategy

This plan should cover amongst other considerations:

  • when to exit;
  • how to exit;
  • what will the legacy be;
  • is the future of the company secure;
  • who the best buyer is; and
  • 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 (sector);
  • the financial performance of the company (scale and profitability);
  • the dynamics of the ownership and leadership teams;
  • overall economic climate; and
  • the availability of finance.

What are the options available to you?

Examples of some of the options available include:

  • sale of the business to a family member(s);
  • sale of the business to employees (Management Buy-Out) – this involves selling to the existing management and/or employees of the business;
  • employee ownership – selling or gifting shares in the business to an employee-owned trust;
  • sale of the business to a third party – either a trade buyer or financial investor. This is a common option for SMEs;
  • 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; and
  • liquidation – seeking a return through the realisation of assets.

Why formulate an Exit Strategy?

The adoption of a clear and well-formulated Exit Strategy can be highly beneficial to both the business owners and other stakeholders such as lenders and/or investors for a number of reasons including, but 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; and
  • peace of mind for stakeholders.

When should you formulate an Exit Strategy?

It is never too early to begin planning an Exit Strategy. Although it may seem unusual to pre-empt your departure we would usually recommend formulating an 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 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. The team has acted on many transactions in a variety of sectors and at a range of valuation.

Whilst every transaction is unique, our experience in executing transactions over the years means we have the expertise required to work with you on formulating an Exit Strategy that is tailored specifically to you and your business requirements.

We work closely with the Tax team at DTE to formulate tax-efficient strategies for business owners and maximise realisations.

If you are interested in discussing what options may be available to you, both now and in the future, please contact a member of the DTE Corporate Finance team on 0161 819 1910 or email .

The team at DTE were instrumental in helping us through the minefield that is dealing with the market, as part of a disposal of part of the Business. Their guidance, support and professionalism were valued by both the Senior Leadership and the Boards and we are extremely grateful at the way they were able to respond to challenges immediately throughout the process.

ANDY RENNISON
Managing Director
3BM
Lewis Pearson DTE Business Advisers

ABOUT THE AUTHOR

Lewis Pearson

Corporate Finance Executive

Lewis is a Chartered Accountant who joined DTE in August 2013. After completing his training within the Audit department, he made the transition to the Corporate Finance team in 2018.

Lewis deals with both Lead Advisory and Transaction Services at DTE. He assists in the full range of services offered including M&A, disposals, MBOs, due diligence, fundraising and strategic reviews.

Email: Lpearson@dtegroup.com   Tel: 07985 3077 82

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