prepare your company for an exit

admincontrol.com

PREPARE YOUR COMPANY FOR AN EXIT

15 valuable tips and tricks on how to successfully attract and transition to new ownership

Prepare your company for an exit

Achieving the expected return for the shareholders of your company is an overall goal for the exit. However, there are several other key success factors, and such projects involve a lot of risks. The future of your company depends on it. How do you go about with such a project?

This e-book is intended to support you in your exit preparations with descriptions of best practice and good advice along the way to a successful exit.

admincontrol.com

Prepare your company for an exit | 2

Start preparing early by creating an exit strategy as part of your long-term business plan. When this is in place and an exit within the forthcoming 1-3 years is somewhat likely, it’s a good idea to run a pre-due diligence process, using a data room to gather and structure business-critical data. When the due diligence is started, you don’t want to spend your time looking for and crafting things that should be in place a long time ago.

The earlier such a process begins, the better prepared you will be for an exit, and the greater the opportunity for success including maximised returns for shareholders.

START THE PLANNING EARLY – DON’T WAIT UNTIL THE EXIT IS IMMINENT

1

admincontrol.com


As part of the exit preparation, successful sellers execute a readiness scan well in advance of the transaction process.

In this process, important questions to answer are:

• Is the estimated timing right?

• Will the company be sales-ready in time?

• Any internal or external interruptions/disturbances to be aware of?

• Anything related to the market and competitors that could affect theexit plans?

• Have you performed a SWOT-analysis?

PERFORM AN EXIT READINESS SCAN

2

admincontrol.com


Deciding on an exit route early on is smart, and this also indicates how many data rooms to open. For instance, if you are planning on a dual listing, you need to set up two at the same time.

At this point, you should also have an idea of relevant and potential buyers.

DECIDE ON AN EXIT ROUTE

3

WHAT ARE DATA ROOMS?

Data rooms are used for document sharing, process support and access control for due diligence and other business-critical projects.

admincontrol.com


In advance of the sales process, this is of utmost importance for maximising value and minimising risk in the transaction.

Ensure that you have all the necessary information in place before you open the data room to potential buyers.

Make sure you include information about:

1. Financial performance

Profit and loss statements, including a detailed presentation of extraordinary costs and income streams during the relevant periods balance sheet statements for the same corresponding periods cash flow statement.

2. Business details/presentation

Value proposition, customer information and business case/value creation strategy for new owners to execute on growth, expectations long-term strategy market expectations.

3. Assets, capabilities corporate documents

• Articles of association Certificate of registration

• Minutes from board meetings

• Minutes from general meetings

• If relevant, documentation on external financing (bank loans etc.)

PERFORM A SELL-SIDE DUE DILIGENCE

4

admincontrol.com


When you are planning to sell your company, it is vital that it stands out and looks good. This is the time to turn every stone and make sure your company assets are in fact ready for sale.

Some things you should think about are the following:

• Make sure the website looks professional and well-organised

• Remember that all the marketing-material need to have a top standard

• Prepare and train key personnel on the journey and goals ahead in orderto have the same story

MAKE YOUR COMPANY AN ATTRACTIVE ASSET

5

admincontrol.com


Building a good relationship with your potential buyers is essential.

This could be done in several ways:

• Invite the other parts to have a “casual” business talk or lunch

• Make sure to share your success stories with potential buyers

• Build trust by showing your numbers and results and make sure theyare the correct ones

BUILD TRUST WITH POTENTIAL BUYERS

6

admincontrol.com


What will you tell your employees, and how are you planning to keep them onboard? Pay particular attention to employees who are also shareholders. They may think of an exit as the last chapter unless you convince them otherwise.

What kind of arrangements would be beneficial to employees when you sell your company?

Who are your key employees?

Can all employees continue to work there? Should one open-up so that the shareholders can buy into the company again after it is sold or is this going to be a FINAL sale?

HAVE A PLAN FOR YOUR EMPLOYEES

7

admincontrol.com


An exit can take many forms, and shapes and no processes are alike. It is crucial to understand who is most likely to be interested in your company and what are the drivers behind this potential interest.

You need to know where the different groups would be coming from and their rationale. You should have a prioritised list of buyer groups along with actual names.

What is right for your company?

• Private equity?

• A competitor?

• An industrial player?

• Stock-listing?

UNDERSTAND WHO IS LIKELY TO BUY YOUR COMPANY

8

admincontrol.com


There are several valuation methods, but three of them are typically used by industry practitioners: comparable company analysis, precedent transactions and DCF (Discounted CASH Flow) analysis.

These are the most common methods of valuation used in private equity, investment banking, corporate development, mergers & acquisitions, leveraged buyouts and most areas of finance.

Comparable company analysis: Comparing the current value of a business to other similar companies by looking at trading multiples like P/E, EV/EBITDA, or other ratios.

Precedent transactions: Comparing the company to other businesses that have recently been sold or acquired in the same industry.

DCF analysis: A forecasts of the business’ cash flow discounted back to today.

The key thing behind all this are of course your company assets:

WHAT IS YOUR COMPANY WORTH?

9

• Products

• Employees

• Technology

• Customers

• Market position

• IP

admincontrol.com


Do not let the planning of an exit interfere with the company’s day-to-day business. Don’t neglect focus on value creation. Make sure you keep your exit plan within the exit team and use a secure communication and distribution channel, like a data room, to avoid:

• Rumours: these can have a negative impact on employees

• Leaks to the public domain: these could affect the price

Some data room platforms include a secure messaging module which enables users to send and receive confidential messages within the platform. It’s a hybrid between mail and chat, allowing users to communicate securely within their respective teams.

BUSINESS AS USUAL

10

admincontrol.com


It is vital to assemble a good exit team within the company. Who should contribute to this? The CEO and a financial representative (CFO or Controller) should always be included, if possible also someone from senior management with expertise regarding the company’s operations.

The exit team needs to be prepared to work extra hours during the project. Recognising this with some sort of benefits is a good idea.

You should also consider including:

• HR

• Marketing

• Product

• IT

ASSEMBLE A COMPETENT EXIT TEAM

11

admincontrol.com


It is useful to get advice from external financial advisors and lawyers since they are specialists in the M&A process. They can also help bring additional potential buyers into the pipeline and give you an outside perspective to avoid blind spots.

In this process, it is wise to use a data room which is custom-designed for collaboration and sharing of business-critical documents. This is a secure, efficient communication and distribution channel where you can talk to the advisors and lawyers.

GET EXTERNAL ADVISORS AND LAWYERS IN PLACE

12

admincontrol.com


We advise having a data room with a powerful Q&A module in place, where the buyer’s side can address their major concerns and questions.

The Q&A function will give you:

• Structure

• Control – a gatekeeper will delegate and qualify questions andanswers before they are published

• Transparency and a future record of the process

• A secure way to track previous questions

PREPARE FOR HARD QUESTIONS AND STRAIGHT ANSWERS

13

admincontrol.com


Once a lawyer has been identified, and outline terms have been agreed, the buyer and the seller will have to carry out due diligence to make sure that everything is in place. This usually entails gathering many documents in a data room for the buyer to analyse.

These documents typically fall into the following categories:

• Commercial

• Legal and corporate

• Financial

• Technical

• ESG

DUE DILIGENCE/DOCUMENTATION PREPARATION

14

admincontrol.com


Set up a new data room immediately after a transaction has ended, with a view to new sales and acquisition processes. When the data room is based on a previous transaction and well maintained, it will be more complete, and the probability of supplementary questions concerning the next transaction will be reduced.

SET UP A NEW DATA ROOM!

15

WOULD YOU LIKE TO KNOW MORE ABOUT OUR DATA ROOMS?

We are always there to help you!

admincontrol.com


1. Board Network and InterSearch, Global Board Survey 20192. Grant Thornton, Is the role of company secretary fit for the future?, 2018

admincontrol.com

right

right

Admincontrols mission is to provide the ultimate solution for decision-makers. The company offers a smart and secure collaboration platform for boards, management and other stakeholders, where they can access, share, discuss and process information efficiently. Admincontrol has over 90.000 active users worldwide.

The company is growing rapidly and is headquartered in Norway with local offices in the UK, Denmark, Sweden, Finland and the Netherlands. Admincontrol is part of the successful Visma group, a leading European software company.

[email protected]

www.admincontrol.com

prepare your company for an exit

Documents