Exit your business effectively and avoid deal fatigue
24 June 2022 | Minutes to read: 2

Exit your business effectively and avoid deal fatigue

By William Buck

So you’ve decided 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.

It’s not simply a matter of money. Other aspects will require contemplation, including the preferred buyer’s profile, objectives and culture; future of your current staff; your own involvement in the business; and tax considerations.

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

While this process can bring a variety of options to the table, it can also be lengthy and expensive. This is where deal fatigue can 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 you as the exiting business owner, right from the outset. That way the most appropriate exit strategies can be identified, focused on and pursued without unnecessary distraction.

These may include:

Exit your business via a trade sale

One of the most popular ways to exit your business 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.

Exit your business through 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. There is always high demand from 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.

Exit your business via an IPO

Floating on the Australian Stock Exchange as a listed company may or may not be a suitable way to exit your business, depending on the nature, financial stature and scale of your business. There are a number of additional rules, responsibilities and costs that come with a public float and these need to be carefully considered and balanced 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. These may include:

  • Buyers that are introduced through existing business relations such as suppliers and customers
  • Similar interstate and international businesses wishing to expand geographically
  • Businesses providing similar products and services but focusing 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 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.

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