Get Exit Ready Series: Preparation
In our last article, we covered the questions you should be asking yourself right now when thinking about getting exit ready.
Now you know when, let’s discuss in this Part 2 of 3 how to prepare you, your team and the business for your optimal exit.
What’s your goal?
Success = highest valuation, right? Hmmm, not quite.
You will have various stakeholders to please so engage discussions with each of them separately to better understand their expectations and what success looks like for them. Having a pre-agreed set of criteria can help manage conflicts of interest and speed up the process by focusing on the “must haves”. It can be an intense and lengthy process to get the Board to agree on what could be an acceptable offer. Don’t let that be you – you want to reach a “Go/No-Go” as fast as you can so you remain focus on growing the business and don’t have any FOMO!
Be clear on what you want to do after a potential transaction. You are one of the stakeholders and whether you aim to stay in the game at the acquiror’s or aim to take some time away asap, that should be part of the design of what “success” looks like.
Teamwork makes the dream work
We recommend that you pre-nominate an internal deal team of 3 people (CEO, CFO and a manager) and an external team such as Board members, advisors, lawyers and potentially bankers (depending on the context and size of the transaction). Everyone should be very clear on the “need to know basis” and confidentiality of their involvement.
External advisors can be critical during this time to keep the business focused on performance as well as act as potential “fusebox” during the negotiations. Tensions will inevitably run high; a lot is at stake and both parties are trying to get their best deals. To preserve the relationships after the deal is signed , use your advisors as a convenient “fusebox” to defuse any friction and as someone to point to during the rougher patches in the negotiations.
Advisors cost money but you might only do this transaction once (at best a handful of times) in your life – so have people by your side that do multiple deals every year. It is not in your best interests to learn on the job!
The valuable items you can prepare and keep warm on your backburner
Dataroom – if you only do one thing, then have this ready to go and update it quarterly. It is highly synergistic with fundraisings in any case and is an easy way to impress a potential acquiror.
Keep a list of your competitors and update it regularly to keep abreast of their appetite for acquisitions. Keep track of their strategic rationale, their recent funding and acquisitions. Consider having some high-level conversations with your top picks – they could be handy “White Knights” if you receive an attractive offer from a potential acquiror you don’t have a strong fit with.
Understanding everyone’s position
To help understand the value to different stakeholders, have a waterfall chart on-the-shelf that summarises all of the commitments your Company has, their ranking order, and illustrates the pay-outs to all stakeholders. This will give you a clear picture of the cashflow implications for each stakeholder whenever you received an offer.
Want to learn more? Read our next article on how to run a stellar process.