Download - You can\'t sell your business twice
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Exit Strategies for Entrepreneurs
By Marc Fecher
Director
Devonshire Corporate Finance Limited
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Agenda
• Brief Overview of market• Who are the buyers• Why would they buy • Timing• Tax• The Exit Puzzle• Process• Tips
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£10m - £50m £50m - £100m Over £100m
Entry EBIT Multiples Down Sharply After Increasing Over Many Years
UK Buy-outs/Buy-ins £10-100 million
Market Trends
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What are my options?
Succession plan
Written exit plan
Unformulated exit plan
Identification of potential buyer
None
Don’t know
• Despite such high awareness of the meaning of “exit strategy”, only (30%) have any form of formal succession planning or written exit plan in place.
• However, one in four (24%) have an unformulated exit planned a further 6% have identified a potential buyer.
• The survey showed that 40% of those surveyed have not considered their exit route grooming or their exit strategy despite being aware of the term exit strategy.
7%
33%
6%
24%
9%
21%
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NO second chances
Right first time!
• Proper Preparation and planning• The Grooming Process
“Failing to plan” is “Planning to Fail”
Single most import transaction in business life
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What is a good Exit Strategy?
• “A plan, that matches owners aspirations with a range of purchasers and their needs”
• Unique to each business
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Who are the buyers
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Premium Buyer
• Strategic Buyer– Platform– Industry expertise– Leverage your assets– Aggressive growth strategy
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Why would they buy
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What are buyers and funders looking for
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Balancing Act
Win Win
Vendors Aspirations
££
Purchasers Requirements
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No pressure on sale – realised opportunityExpected commitment post saleEBIT on an upward curve
Characteristics:◦ Geography◦ Expertise◦ New market entrant◦ Growth
Negotiated valuation of up to £10m [30x historic 10.5x current run rate]
Case study-S Limited - Digital agency
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The Best Time to Sell
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What valuation should I expect?
• NAV minimum
• EBITDA multiple less Debt
• P/E multiple of maintainable earnings
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Reduce Tax Impact
CGTCGT10% / 18%10% / 18%
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The Pre Sale Process
• Objective = maximise value, meet owners emotional expectations and maintain confidentiality
• To improve both the multiple and the quality of the earnings
Maintainable Earnings (Post-Tax)
X Price Earnings Ratio
= The Business Value
• To attract a premium buyer
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The Pre Sale Process
• To improve both the multiple and the quality of the earnings
Threats
Opportunities
Weakness
Strengths Enhance
Remove
Exploit
Manage
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Exit Puzzle
Cash Buyers Market
Esteem USP
Employees
Results Timing
Warranties
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Corporate Clean Up
1. Excess directors / family salaries, pensions
2. Benefits in kind
3. Family property
4. Cash drawings
5. Private Assets
1. The Management Team
2. Option scheme
3. Maintainable Earnings
4. Subsidiaries & Branches
5. Share buy backs
6. Ownership of intangible assets
7. Property
8. Cost base and Margins
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• Identified Several Premium trade buyers (UK and International)
• Created an auction 3 offers
• Due Diligence Findings – Revenue recognition
• Offers Euro 7 – 17 million
• Handheld and project managed process and negotiations
• Timing
Case study - E Poland – Construction Project Management
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Sales Process
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Top 10 Mistakes
1. Process Triggered by adversity
2. No strategic plan
3. No idea of real worth
4. Too much own involvement
5. No DD on other side
6. “CASH” only
7. Weak secondary management team
8. Wrong partner/strategy
9. “Eye off the ball”
10. Timming
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• Profitable - Turnover £10m• Excellent brand being eroded by Asian
competition • 5 European buyer offers• Sector downturn• Revised offers below an acceptable level
I Ltd – Sale
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• Current management did not have the relevant MBO skills
• Restructure the business – £4M Property assets hive down– Find MBI candidate (Once in a life time
opportunity)– Assist with raising the debt funding to buy the
business
Plan B
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Conclusion and next steps
• No second chances• Get it right first time• The best outcome arises when there is:-
– A well planned grooming and sales process
And Plan B
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Why Use DCF
• Transaction Experience - 450 transactions
• Resources - Networking contacts
• Search capabilities and negotiation skills
• We get results!
Contact
Marc Fecher
Direct: 020 7566 3588Mobile: 07957 203559Email: [email protected]/sale
Contact
Marc Fecher
Direct: 020 7566 3588Mobile: 07957 203559Email: [email protected]/sale