This document discusses business succession and transition planning. It notes that less than 5% of businesses successfully transfer ownership, leading to decreased value and legacy issues. The presentation aims to help business owners understand challenges, maximize value during transactions, and have an aligned personal and business transition strategy. It covers identifying goals, understanding market forces like timing and size, qualitative and quantitative value drivers, common pitfalls to avoid, and emphasizes the importance of intentional planning to realize goals and leave a legacy.

1. Working together to make your Vision a reality.
Business Succession and Transition Planning
Where do I begin?
Presented by:
Michelle Bonahoom, CM&AA
michelle@VisionOnePerformance.com
(612) 382-4294
www.VisionOnePerformance.com
Rob Gales
rob@vercor.com
(612) 889-9067
www.Vercor.com
Value Growth • M&A • Integration • Transition Planning

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For over 20 years, VisionOne and Vercor have partnered with small and mid-size
businesses to help them maximize value and navigate critical transitions…
Michelle Bonahoom
CEO and President
VisionOne High Performance Group
 Grew up in rural manufacturing company
 20 years business owner and value growth consulting in over 100 companies
 Partner in family private investment company
 Certified M & A Advisor and President MN Chapter AM&AA
 BS International Business/MBA in Entrepreneurship & Private Equity
Introductions
Rob Gales
Managing Director
Vercor
 Grew up working in dad’s welding and repair business outside of Duluth
 Owned several small businesses
 25 year successful track record in investment banking and capital markets
 15 years turnaround and growth consulting, as consultant and as CEO

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According to studies, less than 5% of businesses realize a successful transfer, leading
to market inefficiency, decreased business values, and a personal legacy gap.
Webinar Objectives
 Understand the transition challenge today’s
business owners face.
 Unpack the importance of an aligned
business and personal transition strategy
 Discover how to maximize value before,
during and after the transaction.
 Discuss critical next steps that could add
value to your business and help you be more
prepared for critical transitions.
Don’t leave your
personal and business
legacy to chance!

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The Problem: The Next 20 Years is Critical

5. Guiding you through a challenging landscape

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The Problem: Unrealized Value
Imaging working
your entire life
to build your
business, only to
discover that
you don’t have
enough value to
achieve your
goals…
Source: Forbes, 2015;
2015 Pepperdine Private
Capital Report;
Christensen, Alton, Rising,
and Waldeck, 2011; 2013
EBRI Retirement
Confidence Survey)
6
Less than 5% realize a successful transfer,
leading to market inefficiency, decreased business
values, and a personal legacy gap.
6

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Why Does This Matter?
A study of 300 former Business Owners indicated that 75%
did not accomplish their personal or financial objectives.
 Individual Legacy Impact: Lack of ability
to leave a legacy, due to life events driving
transition, rather than opportunity driven
transition.
 Business Impact: Unrealized financial
results, tax consequences, and
undesirable timing.
 Macroeconomic Impact: Market
Inefficiency

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The Solution: Intentionally Maximizing Value

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The Solution: Integrated Transition Planning
Business owners who intentionally identify and align a transition strategy
with their strategic planning process, from inception to exit,
will likely realize greater performance and returns than those who don’t.
 A Transition Advisory Team
 An ongoing and integrated transition
planning process:
 At least 3-5 years prior to the
transaction
 7-10 years for family owned
businesses
 Maximizing both quantitative and
qualitative value drivers aligned to
the ideal buyer

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The Solution: Integrated Transition Planning
8 Stages from Cradle to Legacy

11. Beside you to navigate every transition.Beside you to navigate critical transitions

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Identify Goals: 4 Value Driving Forces To Consider
Without an integrated transition strategy, a seller will likely be driven by the events of
their life, rather than their desired vision and objectives.
• Buyer Type
• Financing Options
• Value Drivers
• Owner’s Goals
• Emotional Factors
• 5 “D’s”
• Size
• Market Timing
• Business Model
• Industry
• Political
• Economic
• Societal
• Technological
• Environmental
• Legal
External
Forces
Market
Forces
Business
Forces
Personal
Forces

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Personal Forces: Owner Goals and Emotional Factors
50% of Business Owners exit due to the 5 unexpected “D’s”.
 Retirement
 5 “D’s”: Unexpected life events, such as divorce,
death, disability, departure, or disagreement.
 Need to diversify personal assets.
 Inability to take the company to the “next level”.
 Desire to grow business – need for capital.
Source: Christman, P. (2015).

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Market Forces: Size of Company Drives Value

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Market Forces: Market Timing Drives Value
78 Million Baby Boomers will retire between 2011 and 2029.
How could this impact these historical trends?
10 Year Transfer Cycle
Deal Recession
(Buyer’s Market)
Prime Selling Time
(Seller’s Market)
Almost Recession
(Uncertain Market)
1980-1983 1984-1988 1989-1990
1990-1993 1994-1998 1999-2000
2000-2003 2004-2008 2009-2010
2010-2013 2014-2018 2019-2020
Source: Slee, R. (2011).

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Market Forces: Market Timing Drives Value
Median Transaction Size:
 Acquisition: $30M
 Add On Buy Out: $90M
 Platform Buy Out: $150M

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Market Forces: Business Model Drives Value
Higher
Value
Lower
Value
Higher
Value
Strategic Growth
Direct Competitor
Private Equity Platform
New Market Expansion

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Market Forces: Industry Drives Value
Multiples by Industry and Size
12
10
8
6
4
2
0
EBITDA $M
>$50M
$20-50M
$11-25M
$6-10M
$2-5M
$0-1M
Pepperdine Private Capital Markets Report 2014

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Business Forces: Buyer Type Drives Value
Start by determining the best buyer type that will meet your
personal and business transition goals
Buyer Type
Typical
Multiples
Liquidation or Asset Buyer Asset Value Only
Financial Buyer 2-3X
Private Equity Groups 4-7X*
Strategic Buyers 6-10X +
Management Buy Out (MBO) 5-7X
Employee Stock Ownership Plan (ESOP) 5-6X

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Business Forces: Buyer Type Drives Value
It isn’t always about a 100% Sale – There are other options
 Merger or Joint Venture
 Recapitalization
 Seller Financing
 Independent investors
 Family Offices

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Business Forces: Access to Capital Drives Value
Required returns vary by capital source
Source:
2015 Pepperdine Private Capital Markets Study

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Business Forces: Maximizing Quantitative Value Drivers
It start’s with profitability, BUT…
 Quality of earnings is important
 Normalized Earnings
 Don’t cut costs that limit qualitative value
 Don’t add top-line revenues that cannot be
supported or erode margins
 The wrong acquisition or misaligned
integration strategy can actually dilute value

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Business Forces: Maximizing Qualitative Value Drivers
Company A Value Drivers Company B
25 Years Age 25 Years
Niche Consumer Product Niche Consumer
$30M Sales $30M
$3M EBITDA $3M
Nominal Growth Rate Nominal
None Management Team Experienced
None Strategic Planning Regular/Deployed
Old, Antiquated Systems State of Art
Inconsistent Processes Finely tuned and aligned
No market focus Voice of Stakeholder Strategic Partnerships
Considering qualitative drivers is KEY to maximizing overall value!

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Business Forces: Maximizing Qualitative Value Drivers
People Operations
Planning
Financial
Sales
Marketing
Legal &
Infrastructure
Leadership
Today, 79% of a company’s
value is derived from key
intangible assets that
differentiate the
organization.
(Mellon and Evans, 2010),

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Business Forces: Maximizing Qualitative Value Drivers
Planning
 Strategic Planning
 Strategic Implementation
 Succession Planning
Finance
 Financial Reporting Quality
 Financial Management
 Stability
 Access to Capital
Customer Focus
 Price, Quality, Availability,
Selection and Functionality
 Customer: Concentration,
Customer Relationships and
Engagement
 Market: Position,
Competition, Growth
Potential and Strategy, and
Brand/Reputation
Operations
 Key Systems and Processes
 Risk Management
 Distribution Channels
 R&D and Continuous
Improvement
 Environmental and Safety
 Community Relations
People
 Labor Supply
 Aligned Roles
 Training and Development
 Performance Management
 Engagement
Leadership
 Advisory Board
 Management Team
 Individual Ownership
Information
 Technology/Data
Infrastructure
 Metrics
 Shared Resources
Infrastructure
 Building and Equipment
 Geographic Location
Legal/Organizational Structure
 Ability to Scale
 Legal Structure and
Protections
 Culture
 Policies and Procedures
Industry Related
 Barriers to Entry
 Technology
 Benchmarks and Standards

26. Helping you achieve maximum value and high performance

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Wrap up: Know the Current State of the Market
 We are starting to see a shift to an uncertain market
 Seeing unmet ROI expectations; values stabilizing
 Private Equity becoming larger part of M&A Market
 Increased focus on larger transactions
 Seller expectations inflated
 Company quality is more important
 Increasingly lower quality companies
 Private Equity outperforms others by 4X revenue growth
 Seller earn outs increasing
 Keys to Success
 Move to European model - Seller does upfront due diligence
 More buyers/investors are differentiating themselves
Source:
Q2 2017 Pitchbook M&A Report; AM&AA 2017
Summer Conference;

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Wrap up: Avoid Common Pitfalls and Deal Breakers
 Treating it like a “transaction”
 Dealing with one buyer at a time
 Focusing on an asking price
 Lack of control/reacting
 Ignoring value detractors
 Not striking while the iron is hot
 Poor relationship management
 The wrong Transition Team
 Owner needed “in” the business
 Lack of documentation
 Poor quality of earnings
 Misaligned systems and processes
 Product liability
 Unresolved EPA/Safety issues
 Unresolved lawsuits

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Next Steps: Don’t leave your company’s legacy to chance
“Make it Happen” “Make it Last”“Make it Transition”
“Make it Matter”
90% Not Ready 36% Don’t Close 70% Fail Integration
75% Without a Plan
Personal • Family • Legacy Planning

30. Make it grow. Make it transition. Make it last. Make it matter.
Any Questions?

31. Michelle Bonahoom
michelle@visiononeperformance.com
612-382-4294
www.VisionOnePerformance.com
Rob Gales
rob@vercor.com
612-889-9067
www.vercor.com
Don’t leave your company legacy to chance!
Preparation begins with a conversation.
Call us today.