Wayne Wilson & Company
Business Advisory Services
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Business Valuation & Exit Strategies:
Planning for the End Game
A Primer for Business Owners
Seeking Liquidity
Nov 2008 © Wayne Wilson & Company. 1

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Begin with the END in Mind.
Nov 2008 © Wayne Wilson & Company. 2

Preliminary Questions –
Environmental/ Situational
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• Is your business mature or still growing rapidly?
• Is your industry stable, consolidating or declining?
• Does the business generate excess cash or require
continual investments?
• Do you wish to continue working?
• Is successor management in place or available?
Nov 2008 © Wayne Wilson & Company. 3

Preliminary Questions –
Transactional
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• Are there logical buyers or investors?
• Do you want cash now or over time?
• Do you wish to retain an equity upside?
• Do you have other business opportunities with
greater potential?
• Are there other personal, family or health issues?
Nov 2008 © Wayne Wilson & Company. 4

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Valuation is in the Eye of the
Beholder.
Nov 2008 © Wayne Wilson & Company. 5

Valuation – Factors
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• Fundamentals
• Players
• Currencies
Nov 2008 © Wayne Wilson & Company. 6

Valuation – Fundamentals
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• Revenue size
• Revenue growth rate
• Market position / share
• Profitability
• Management / Successor
Nov 2008 © Wayne Wilson & Company. 7

Valuation – Players
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• Strategic buyers
• Financial buyers
• New operators
• Investors
– Public
– Private
• Employees / Managers
Nov 2008 © Wayne Wilson & Company. 8

Valuation – Currencies
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• Cash
• Earn outs
• Seller notes
• Stock
• Combinations
Nov 2008 © Wayne Wilson & Company. 9

Monetizing Your Equity*
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Some Methods for Monetizing Your Equity:
• Dividends • Hire & Retire
• Recaps • Liquidate
• IPOs • Sell Out
• MBOs
*Wayne Wilson, “7 Ways to Monetize Your Equity,”
Companies in Transition, June 2007.
Nov 2008 © Wayne Wilson & Company. 10

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The Value Quadrant:
Trading between Value and Risk
Nov 2008 © Wayne Wilson & Company. 11

The Value Quadrant
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Higher $ The Ideal
Value
Lower
Lower Higher
Time / Risk
Nov 2008 © Wayne Wilson & Company. 12

The Value Quadrant
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Higher $
Value
All Cash?
Lower
Lower Higher
Time / Risk
Nov 2008 © Wayne Wilson & Company. 13

The Value Quadrant
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Higher $ Financial Buyer
Leveraged Recap?
Value
Lower
Lower Higher
Time / Risk
Nov 2008 © Wayne Wilson & Company. 14

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A Few Case Histories:
Situations & Solutions
Nov 2008 © Wayne Wilson & Company. 15

Case #1 – Janitorial Svcs
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Situation Solution
• Closely held • Strategic sale to large
• Profitable national operator
• Strong local franchise • Premium price
• Owner wanted to • 100% seller notes
retire – Secured
– Above market rate
– Limit reinvestment risk
Nov 2008 © Wayne Wilson & Company. 16

Case #2 – Software services
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Situation Solution
• Closely held • Strategic sale to public
• Growing rapidly company buyer
• Little infrastructure • Cash + earnout
• Needed help • Continued w/ business
– Div President
– Options
– Career path
Nov 2008 © Wayne Wilson & Company. 17

Case #3 – Radio Station Gp
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Situation Solution
• Closely held • Private equity leveraged
recap
• Had grown rapidly via
acquisitions • Back-end equity stake;
but No cash
• Struggling with heavy • Continued to run the
debt load during a business
• Downturn in • Stake worth millions
advertising after advertising rebound
Nov 2008 © Wayne Wilson & Company. 18

Case #4 – Cutting Tools
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Situation Solution
• Closely held • Private recap – sale to a
• Very profitable large conglomerate
• Owner healthy but • Sold 80% for Cash for
getting older estate liquidity & gifts
• Concerned about • Retained 20% of equity
estate planning • Continued to run the
business
Nov 2008 © Wayne Wilson & Company. 19

Case #5 – Construction Co.
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Situation Solution
• One owner – wanted • Management buyout
to retire • Bank loan, personally
• Very profitable guaranteed by managers
• Two key operating for initial payout
managers • Seller notes for balance
• Owner flexible on over several years
pricing
Nov 2008 © Wayne Wilson & Company. 20

Case #6 – IT Reseller
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Situation Solution
• Closely held • Initial public offering
• Growing rapidly • No secondary shares
• Needed growth capital • Large tax dividend
• Owners wanted to • Take out > $30 m of
maintain control $60 m proceeds
Nov 2008 © Wayne Wilson & Company. 21

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Where Do YOU Want to Go?
Nov 2008 © Wayne Wilson & Company. 22

About Wayne Wilson
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Wayne Wilson is the principal of Wayne Wilson & Company
(www.waynewilson.com), a business advisory services firm providing executive
coaching and advisory services on growth-related issues to owner/CEOs of
middle-market companies.
He has advised companies on: developing growth strategies; improving
operational profitability; financing business operations; establishing corporate
governance and management processes; designing management incentive
compensation programs; managing mergers & acquisitions; and monetizing
founder equity.
Wayne can be reached at 603.763.3435 or wayne@waynewilson.com
Nov 2008 © Wayne Wilson & Company. 23