Exit strategies for private companies: Seize the opportunity to secure your future

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You’ve worked hard to build a successful company and create a legacy

Selling your business is a high-stakes and emotional capstone event. You need a no-surprises approach to help guide you through, don’t misstep on the final few steps to realizing the value you have worked so hard to achieve.

For sellers across the spectrum, proactive preparation is absolutely mandatory. Whether you are divesting the business completely or bringing in a private equity investor to fuel additional growth, the process you develop and follow will play a critical role in creating value for the family or its shareholders.

Your vision for your future is uniquely your own. We trust that the thoughts in our expansive and newly updated publication will help you navigate the sales process so that you can realize that future.

The five phases of a well-structured exit process

Making the decision to sell

You’re in the driver’s seat.

Taking a proactive stance puts you in the driver’s seat to plan for the outcome that you want, while also enhancing the value of the business. The first step is to identify your objectives, both financial and non-financial.

Quick tips:

  • Do take the time to gather information and get your financial house in order, so you’ll better be able to evaluate a future offer.
  • Do consider tax alternatives early.
  • Don’t make the mistake of neglecting day-to-day operations as you prepare for a sale. You need to maximize the business’s value.

Understanding the buyer universe

See your business through the eyes of the buyer.

Each set of buyers has its own set of advantages and disadvantages, based on your objectives: 

  1. Strategic or pure-play. This buyer could be an existing competitor or a sector company looking to get a foothold in your geography or industry. Strategic buyers seek opportunities for cost-savings or revenue synergies. The owner is unlikely to stay on.
  2. Vertical integrator. This buyer is likely found by looking up and down the supply chain, such as a customer or supplier. They tend to offer advantages such as an efficient process, but present competitive challenges during the process for both buyer and seller.
  3. Private equity/venture capital. These buyers look for opportunities to invest in companies with superior management, growth, and returns profiles, typically planning to exit in the short to medium term. Owners typically stay involved in the business.

Preparing the business for a sale

You want your buyers to see the future.

Telling the story of the future of the business is the foundation to a good exit process. The right information—interpreted and presented correctly and directed strategically—unlocks the basis for value and builds confidence in the projected performance. 

  • Create your circle of knowledge. Assemble a small group of key individuals, including employees, on a need-to-know basis. Retain trusted advisers.
  • Perform sell-side due diligence. Prepare financial reporting, including a Quality of Earnings report. Identify key value implications and appropriately address any issues.
  • Build your online data room. Compile detailed, comprehensive information about your organization, striking the right balance to enable a buyer to determine value while limiting the disclosure of sensitive information.
  • Tell your story. Present the compelling case for the future of your business. Create a robust set of financial projections that can stand up to buyer skepticism and rigorous analyses.

The deal process

Maintaining control for an optical outcome

At this stage, it is critical for the seller to actively exert control over those elements which they can. Refer to these pre-negotiation checks before soliciting buyers to ensure you are prepared.

  1. Line up resources. Make sure your team is ready, and includes all of the trusted advisors you will need across legal, tax, banking, etc., as well as any specialty experts.
  2. Terms. Determine what matters to you. Terms, such as non-compete arrangements, management continuity, customer or community commitments, family employment, and timing, vary greatly. 
  3. Certainty to close. Consider the buyer’s financial wherewithal, their reputation in the marketplace, and their logistic ability to get the deal done. Only provide exclusivity to a buyer you are confident can follow through.

Preparing for life after the deal

Managing your wealth like you’ve managed your business

What should you do now? Celebrate to be sure. But in short order, recognize that managing wealth well is not too dissimilar to running a business successfully for many years. You have alternatives to preserve wealth for a long time and/or ensure it flows where you want it to in the most tax-efficient manner as possible. This is when business gets personal.

Contact us

Shawn Panson

Partner, Private Company Services Leader, PwC US

J. Fentress Seagroves

Deals Partner, PwC US

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