In making the decision to exit it is probably appropriate to review the alternatives.
These might include doing nothing or carrying on as you are for longer ( beware the adage that a business must change, grow or die ), becoming acquisitive yourself ( ie becoming a buy and build operation ), enabling a Management Buy Out ( MBO ) by management that want to stay with the business longer ( or some variation on this like a Buy-in MBO ) or floating the company.
There are many many factors to be considered here but for example if you are to carry on then the key members of the Board and influential shareholders must be willing to do so. ( If you force people to go for longer then they are unlikely to be motivated to do so ). The timing ( in relation to what is going on in the market or the economy ) may be wrong to carry on.
To do a Buy and Build ( become an acquirer yourself ) you must have the skills to do so. You must have the right combination of people with the right experience to attract investors to provide funds to enable a buy and build. Typically this means that you must have a Board that is substantially comprised of people experienced in buy and build operations.
To do an MBO the people that are proposing to do the MBO must have the ability to raise the finance to buy-out the shareholders and Directors that are not staying. Often this is not the case because the most experienced people are leaving but it is sometimes the case that they ( or they and others ) can combine to make a backable team.
To float, leaving aside whether the ( stock ) market is ready for such a public offering, there is a considerable cost involved, considerable time involved and the management team must be rock solid. You are highly unlikely to be able to exit out of a float for some time and if you say that you are then the float is probably dead in the water.
What clearly comes out of all these alternatives to a trade sale is that you must have the right people committed to such a strategy. Even with the trade sale most people will be committed ( in all likelihood ) for a period of time.
To be continued…
This blog post is a part of a series of posts describing The Sales Process – you can access the other parts of the series from the links below:
- Making the decision
- Alternative Options to an exit by trade sale
- Getting ready to sell
- Finding an M & A Adviser – The Beauty Parade !!
- Who/where are the buyers
- “The Teaser”
- Prioritising Interest
- The Sale Document – your greatest ever sales proposal
- Negotiations and Heads of Terms
- Due Diligence
- Closing the deal
- Objective Parties