Get Exit Ready Series: Execution

Execution Home-Run

So far in this series, we have covered the questions you should be asking yourself right now when thinking about exit and our top tips for preparation.

Now you’re clear on what a negotiable offer would need, you have your team sheet ready to engage and you have an action plan to raise interest from potential acquirers – what do you do to run an actual process?

Approached vs Running your own Process – context is key!

Whether you’re approached or decide to manage a formal process, this will dictate your next steps.

• Approached – show time! You have your initial plan on the back burner so stick to it as much as possible until you can improve on it. This allows you to trust the less-emotional version of yourself (and team). Organise your kick-off meeting ASAP and send the details of the offer to your pre-selected team. Top tip: have 1 person in charge of gathering the comments and benchmarking them against your initial list of criteria.

Next key decision: engage on an exclusive basis or make it a competitive process?

There’s no rule for that decision, there are many factors to consider including the strength of the offer received, the time-sensitivity of the transaction for the acquirer and your fit with that acquirer.

• Managing a formal process – Get out your list of criteria and initial names for potentially interested parties. Organise a kick-off meeting with your pre-selected team and agree on: (1) a timeline and (2) the immediate to-do list.

Next key decision: decide on your type of execution.

Internal can work if you have a strong CFO with M&A experience and enough bandwidth to focus on the process. Bankers are more for Series C & D onwards. These are teams of professionals that focus exclusively on M&A transactions. Or, hybrid advisors who are hands-on experts, usually with Banking & Entrepreneurial experience, and are best for younger companies who don’t know what they don’t know nor what they need.

Recommendation: set up a weekly call for all parties to have a chance to update the full team and clear out any blockage.

When is an offer worth considering?

Evaluate the offer against the criteria identified during your preparation phase. Breaking down the terms of the offer(s) received, and analysing the small print in details – a lot of actual value can be created from negotiating these. They’re usually the less sensitive topics but can contain clauses that have significant impact on the stakeholder's personal goals.

Next, prioritise your goals for the negotiation. Can you negotiate it to a decent offer? If not, don’t waste time on it.

Keep in mind: Sometimes the best deal is no deal (today).

AND be careful of “interested partied” who are really fishing for information!

Converting into a deal

Strive to create some competitive tension between a few interested parties. Be bold and creative in challenging their analysis of your company’s value with your own. Another way to increase your leverage is to broaden the horizon on potentially interested acquirers.

Now, thanks to your efforts at the preparation phase, your due diligence should be a smoother process and you can drive it to the narrative you want (especially in the Q&A process). This is a stronger position than being on your backfoot and struggling to cope with the demands.

Strategically use third parties to prepare data-driven arguments. They’ve done this many times before and will know the latest best practices.

Remember: use them strategically as a “fuse box”, as discussed in our previous article.

Consider the 3rd Half – you’ll have to live with the deal you sign up to!

74% of entrepreneurs don’t have a plan for life after exit. Do you want a new job within the new entity or do you aspire more to a break after years of intense focus on building your company?

Staying in the game can be part of your negotiation of the deal. Consider the challenges of an integration, the cultural fit for you and your team, as well as the lifestyle you hope to have. If you’re planning to leave the company as quickly as possible then be mindful of cash vs stock options, earn-out and non-compete clauses… realistically, expect to remain tied to the company in some capacity for a few months after the transaction. Making sure your business continues (over)performing to keep your options open (and your leverage strong!) can be challenging but cannot be forgotten.

Keep in mind: there is not deal until you have signed on the dotted line!

Want to learn more? Read our previous articles on the questions to ask yourself right now when thinking about exit and our top tips for preparation.