RECENTLY I was asked to advise a business owner on the sale of his company. It was a complicated transaction, but 24 hours before the deal was due to complete the buyer’s funder suddenly pulled out because the bank would not support its proposed acquisition.
The business owner was left with the prospect of an aborted sale for his 27-year-old company, and an unsure future for his staff and himself. I immediately talked through the possible options with him in planning for the future.
Given the strength of his experienced management team, we agreed that a management buy out was a strong possibility. Following intense discussions with the senior team they decided to buy into the company. Six days later the MBO was completed.
In less than a week we had turned round a scuppered sale, created a successful MBO and underpinned the future health of the company.
The key point that emerged from this experience is that it is always important to assess all exit options, and never believe there is only one way forward.
There are usually a range of routes for business owners planning an exit. It could be a transfer to the next generation of the family, a disposal of the company to management, a buy-in team or venture capitalist, or a sale to a third-party buyer.
Deals are difficult to fund at the moment, and banks remain cautious. However, with the help of experienced advisers who can think creatively and sensitively, deals can still happen.
It’s never too early to begin planning for an exit. Careful thought now should lead to more strategic decisions being taken, which will reduce the likelihood of last-minute decisions having to be made, which could reduce your return when you do eventually exit.
Advisers who understand the objectives of the business owner extremely well, and can suggest the most effective routes to achieve those objectives are key to a successful exit.
In the case of the business owner above the exit worked out well. My client stepped away from the business in three months rather than the 12 months it could have taken to attract another buyer. Early planning helps to ensure a smooth exit from the start.
:: Carl Swansbury is director of corporate finance at Ryecroft Glenton Corporate Finance, Newcastle
