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Planning a Successful M&A Exit – Know Your Motivation

By Generational Equity

10/21/2016

As we discussed a few days ago, Axial, a leading online platform that introduces capital providers with business owners and buyers, recently published a tremendous whitepaper entitled “The CEOs Guide to a Successful Exit.”

The strength of this whitepaper is due to the fact that it is based on input from a number of Vistage “coaches.” In case you are not familiar with Vistage, it is a fantastic, peer-based CEO educational group, providing local chapters with speakers who are experienced in developing and mentoring business owners.

I found the information in the whitepaper helpful and timely because it really gets to the heart of the matter relating to how to effectively exit. Two days ago we looked at the need to plan for your post-transaction life long before you get to that point.

Today we take that one step further and with input from sage Vistage coaches, we delve into a topic that really is not examined in depth enough: Answering the “why” of your exit plan. Here is how the whitepaper posits the question:

There are a number of reasons that an owner may be ready to pass the baton. It’s not always all about the money. “Start with the why,” recommends Chuck Andrews, a Vistage Chair in Chicago. “Why are you doing it? What are you going to do afterwards?”

The reason that addressing this question is important is simply this: Selling a company under the best of circumstances can be an arduous, time-consuming, and often emotional experience. If you are not 100% sure of your motivation, if you waver at all as the final bell rings, you may walk away from an excellent deal simply because of a lack of understanding of why you are planning to exit.

That not only can be financially ruinous to you, it most likely will create a host of confidentiality issues both internally and externally. So it is far better to fully understand the “why” associated with your exit long before you reach that point.

Unfortunately far too often external circumstances force the “why” to become immediate, not planned in advance. I am referring to when one of the big D’s rears their ugly heads: Death, Disability, Divorce, Disagreement among partners, and/or Disinterest – a.k.a. boredom or burnout.

When one of these forces an owner to sell, the process is usually not at an optimal time and the deal is often to the benefit of the buyer, not the seller. This is how the Axial whitepaper describes the situation:

“When things are going well for an organization is the best time to look for an exit. Unfortunately, most business owners aren’t looking to exit because that’s the time they’re having fun,” says Bob Berk, a Master Vistage Chair in Chicago.

“In some cases, the current ownership may have pressing personal reasons to exit such as irreconcilable differences between the co-owners, lack of an heir, or health problems.”

As we have examined in past posts, the optimal time to exit is when the market indicates that it is time and the business is performing reasonably well. Timing, as with all things, is the key. But the real key to timing an exit is planning, understanding your motivation, and moving quickly once the stars align.

Time and space do not allow me to further drill into this topic. If would like to learn more about effective exiting, I invite you to attend a Generational Equity exit planning seminar. We hold these throughout North America and they are designed to aid business owners in developing exit plans that meet their personal and business financial goals.

To learn more, call me at 972-232-1125 or visit our website to look at a list of our pending seminar locations:

Carl Doerksen is the Director of Corporate Development at Generational Equity.

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