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Planning for sale & life after exit

Monday, 17 July 2017 14:36 PM | EXIT & SUCCESSION PLANNING

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The total value of member exits in 2017 was over £1.2 billion. While some sold for substantial sums, it's often life-changing for founders who have to adjust to the business meaning less to them - and them meaning less to their business.

There were some headline grabbing exits in 2017. In May, PCA Predict was acquired by GB Group for £73.8m; Leyou Technologies bought Splash Damage for £125m; and The Office Group sold its majority stake to Blackstone for £500m.

The exit community of members planning to sell, or who have already sold, is growing within The Supper Club. Unsurprising then that we had a full house for our last Speaker Boutique on ‘Planning for sale & beyond’, with a panel of experts and members sharing insights and advice on all stages of selling a business – from preparation and negotiation to life after exit.

James Monico, co-founder of Cloudreach, which sold its majority stake to Blackstone in February, likened the process of preparing for sale to a bird of paradise. “Before the courtship, you need to make yourself attractive and make them come to you; whether it’s by winning awards or saying interesting things in the press,” he explained.

It’s also important not to get carried away during the courtship. “During the sales process, be careful not to under-trade; get yourself a good FD to ensure your accounts balance with your forecast numbers,” he added.

This point was echoed by Guy Mucklow, founder & CEO of PCA Predict (formerly Postcode Anywhere). “Don’t take your eye off your business,” he warned. “We got an experienced CFO on board who had been through two exits. You need a detail person who is on the pulse and can build a perfect data room.”

Building the right senior leadership team will help you achieve the best price and the best exit. “It’s a hard adjustment for a founder to be told what to do by a new owner,” added Guy.

To avoid an earn out, build an operating team and board who can run it without you. Keep a schedule of your time off or away from the office to demonstrate this is the case.

Guy Mucklow

But just as you need to keep managing expectations, especially your own, you need to maintain alignment between all stakeholders - because motivations are more likely to change the longer it takes. “Selling your business can be like death by a thousand cuts,” said Guy, commenting on the often protracted process of chipping and looking for skeletons in the closet.

A co-founder who is motivated to stay and run the business can also help you get a better exit. “My co-founder is staying in the business to manage the transition, which not only reassures the buyer but has allowed me to leave,” said James.

The value of good advice

Guy highlighted the importance of good advisers. “You will be judged by the company you keep; so get the best advisers you can afford to deal with the buyer’s heavyweights, especially if it’s a trade sale.”

Edward Persse, a partner at Osborne Clarke who hosted the event, stressed the importance of preparing for due diligence and what you should expect from your advisers.

The best multiples are from a clean business with its house in order, and the sooner you speak to an adviser about your plans the sooner they can flag any issues and address them before the process begins. The best financial result comes from setting expectations early and tax planning to maximise wealth on exit.

This point was reinforced by Rob Douglas, an associate director at RBC Wealth Management which also supported the event.“Business owners are often so focused on the sale and making sure it goes through that they put off planning their wealth and what they will do next,” he explained. “We try to speak to them early enough to help them understand what they need to make from an exit for the life they want afterwards and how to plan their wealth so they can focus on their future.”

The future can be daunting and the exit can be an anti-climax, as Martyn Dawes, high growth business mentor and founder & former CEO of Coffee Nation explained: “Nothing can prepare you for the event of leaving your business and losing that power base. It’s like climbing a mountain, reaching the summit, finding nothing there and having to come back down. Don’t rush into anything; give yourself time and space to rediscover yourself and your passions. Be kind to yourself.”

Click here for filmed interviews with members and experts from our Speaker Boutique on ‘Planning for sale & beyond’.

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