Exit Strategy and Succession Planning - From Plan to Execution
 

Exit Strategy and Succession Planning - From Plan to Execution

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Exit Strategy and Succession Planning

Exit Strategy and Succession Planning
From Plan to Execution.

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Exit Strategy and Succession Planning - From Plan to Execution Exit Strategy and Succession Planning - From Plan to Execution Presentation Transcript

  • Exit Strategy and Succession Planning From Plan to Execution Presented by Bob Gellman, CPA, MSA, PFS Managing Director CBIZ MHM, LLC Author of
  • 2
  • 3 Implications for Different Types of Individuals Consider Your Personal Situation Understand the Motivations of Others Students Employees Managers Executives Minority Owners Majority Owners President/Non-Owners Family Member Owners View slide
  • 4 Implications for Different Types of Businesses Real Estate Retail Distribution Manufacturing Engineering Architecture Partnership Accounting Legal Internet Software Pharmaceutical Medical Equipment Family Businesses Professional Service Businesses Funded Technology Businesses Closely Held Business Multi Member VC/PEG/Founders/Mgrs View slide
  • 5 Begin with the End in Mind Evaluate Your Personal Goals Understand Your Company’s Valuation Evaluate Your Exit Strategy Integrate Your Business Plan Protect Your Assets Develop Your Team PlanningExecution On-Going Processes Strategy vs. Opportunity
  • 6 Begin with the End in Mind Evaluate Your Personal Goals Understand Your Company’s Valuation Evaluate Your Exit Strategy Integrate Your Business Plan Protect Your Assets Develop Your Team PlanningExecution On-Going Processes
  • 7 Consider the Long-Term Impact of Today’s Choices Business Choices Advisory Team Type of Entity Leadership Team Strategic and Operational Objectives New Opportunities Uses of Cash Personal Choices Advisory Team Investment Choices Estate Planning
  • 8 Watch for Windows of Opportunity $ T4 T7  Point B 1 . 2 . 3 . . 4 . 7 Which Business and Economic Cycles Are Important? How Can These Cycles Be Anticipated? What about changes in the law?
  • 9 Begin with the End in Mind Evaluate Your Personal Goals Understand Your Company’s Valuation Evaluate Your Exit Strategy Integrate Your Business Plan Protect Your Assets Develop Your Team PlanningExecution On-Going Processes
  • 10 What Have You Dreamed of Doing?
  • 11 Targeting In On Your Dreams $10M T5  Point B T0 Consider … •Where? •Why? •When? To Determine… •How Much?* There are different considerations for: Closely Held Businesses Multi-Member Partnerships VC/PEG/Founder/Manager Businesses
  • 12 Begin with the End in Mind Evaluate Your Personal Goals Understand Your Company’s Valuation Evaluate Your Exit Strategy Integrate Your Business Plan Protect Your Assets Develop Your Team PlanningExecution On-Going Processes
  • 13 How Can You Value Your Business for Planning Purposes?  Point B  Point A Real Estate Retail Distribution Manufacturing Engineering Architecture Accounting Legal Internet Software Pharmaceutical Medical Equipment Multiples of Sales? Multiples of Earnings? Comparables? Discounted Cash Flows? All Allow Leverage That Will Enable You to Get to Point B Faster (Are we there yet?)
  • 14 Begin with the End in Mind Evaluate Your Personal Goals Understand Your Company’s Valuation Evaluate Your Exit Strategy Integrate Your Business Plan Protect Your Assets Develop Your Team PlanningExecution On-Going Processes
  • 15 Differing Motivations Impact Value Family Businesses Professional Service Businesses Funded Technology Businesses $ Tx  Point B T0  Family Business  Going Public
  • 16 Transfer Option Value Range Transfer Option Value Established By Value Range Family Seller w/in IRS Guidelines (Valuation) Low Management Seller/Valuation Middle-Low Employees Valuation Middle Partners Agreement/Valuation Middle Private Equity Investors Valuation/Negotiation Middle-High Strategic Buyers Market Value/Negotiation High Going Public Market Value High
  • 17 Transfer Options and Methods Family Management Employees Partners Private Equity Investors Strategic Buyers Going Public Gift Management Buy Outs/Ins ESOPs Buy/Sell Negotiated Consolidations IPO Self Cancelling Installment Notes Carve Out Acquisitions Stock Options Russian Roulette One-step Private Auctions Roll Up Direct Public Offerings Annuities Phantom Stock Stock Appreciation Rights Dutch Auction Two-step Private Auctions By and Build Reverse Merger Grantor Retained Annuity Trusts Right of First Refusal Recapitalizations Family Limited Partnerships Defective Grantor Trusts
  • 18 What if Your Numbers Don’t Add Up?  Point B  Point A  Point C?
  • 19 Begin with the End in Mind Evaluate Your Personal Goals Understand Your Company’s Valuation Evaluate Your Exit Strategy Integrate Your Business Plan Protect Your Assets Develop Your Team PlanningExecution On-Going Processes
  • 20 How Will You Execute Your Strategy? T1 T2 T3 T4 T5 . Point B Growth Rate •Business Goals •Strategic Plan •Annual Budget Processes •KPIs •Value Management •Value Targets •Incentive Systems •Leadership
  • 21 2011 2012 2013 FCST FCST FCST NET INCOME (15% Growth) $ 6,250 $ 8,812 $ 12,507 ADD BACK: INTEREST EXPENSE 1,000 1,000 1,000 TAX EXPENSE 2,000 2,000 2,000 DEPRECIATION EXPENSE 12,000 12,000 12,000 AMORTIZATION EXPENSE 2,000 2,000 2,000 OWNERS PERSONAL EXPENSES AND ADJUSTMENTS FOR NORMALIZED PAY 0 0 0 EBITDA $ 23,250 $ 25,813 $ 29,507 INDUSTRY MULTIPLES LOW 3.0 3.0 3.0 HIGH 5.0 5.0 5.0 ESTIMATED ENTERPRISE VALUATION LOW $ 69,750 $ 77,438 $ 88,521 HIGH $116,250 $129,063 $147,534 LESS: INTEREST BEARING DEBT ($30,000) ($35,000) ($40,000) NET EQUITY VALUATION LOW $ 39,750 $ 42,438 $ 48,521 HIGH $ 86,250 $ 94,063 $107,534 What might successful execution look like?
  • 22 Linking Value to Value Management  Point B  Point A Real Estate Retail Distribution Manufacturing Engineering Architecture Accounting Legal Internet Software Pharmaceutical Medical Equipment How Can You Leverage Operational Performance and Get to Point B Faster? (Are we there yet?)
  • 23 Begin with the End in Mind Evaluate Your Personal Goals Understand Your Company’s Valuation Evaluate Your Exit Strategy Integrate Your Business Plan Protect Your Assets Develop Your Team PlanningExecution On-Going Processes
  • 24 Eliminate Isolate Insure Manage Asset Protection Strategies RISK Business Assets Personal Assets
  • 25 Begin with the End in Mind Evaluate Your Personal Goals Understand Your Company’s Valuation Evaluate Your Exit Strategy Integrate Your Business Plan Protect Your Assets Develop Your Team PlanningExecution On-Going Processes
  • 26 How Can You Ensure Timely Execution?  CPAs  Bankers  Attorneys  Insurance Advisors  Business Consultants  Valuation Consultants  M & A Specialist/Business Broker  Investment Advisors  Others? What does good execution look like? Personal CFO Project Manager Prioritized Action Items Integrated Service Providers
  • 27 Exit Strategy Assessment •No Cost for 1 to 2 hour meeting •Should include key stakeholders •Involves facilitated group participation in gap analysis •Takeaways include prioritized list of business and personal action items.
  • 28 Available at Amazon.com
  • 29 Presentation By: Robert C. Gellman, CPA, MSA, PFS Managing Director CBIZ MHM, LLC (858) 795-2110 bgellman@cbiz.com On LinkedIn http://www.linkedin.com/in/bgellman
  • 30 Thank You!