2009 Exit Planning Overview Final


Published on

Presentation on the steps of Preparing a business for a transition event to management, familiy, or 3rd party sale

Published in: Economy & Finance, Business
1 Like
  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide
  • 2009 Exit Planning Overview Final

    1. 1. Exit Planning A Roadmap to Achieving Ownership Goals “Getting it right the first time” Strategic Exit Advisors 95 W. Court Street Doylestown, PA 18901 www.se-adv.com PA – (215) 489-8881 NJ – (609) 466-3100 Your Future, Our Focus SM
    2. 2. Roadmap Questions <ul><li>Beginning the Journey </li></ul><ul><li>Who will you sell or pass the business on to? </li></ul><ul><li>How much money do you need after leaving the business, to live comfortably in your lifestyle? </li></ul><ul><li>When will you begin to leave the business? </li></ul><ul><ul><li>3 to 5 years prior to starting departure </li></ul></ul>
    3. 3. Let's Define Exit Planning <ul><ul><li>Exit Planning is a 7 step process that aligns your business ownership interest with your personal goals </li></ul></ul><ul><ul><li>It is designed to answer the questions that keep owners like you up at night </li></ul></ul><ul><ul><ul><li>What is my company worth? </li></ul></ul></ul><ul><ul><ul><li>Is there a market for my company? </li></ul></ul></ul><ul><ul><ul><li>Who will buy my company? </li></ul></ul></ul><ul><ul><ul><li>If something happens, is the business protected? </li></ul></ul></ul><ul><ul><ul><li>How do I maximize value and minimize taxes? </li></ul></ul></ul><ul><ul><ul><li>Will the business fund my life style, or Legacy goals? </li></ul></ul></ul>Overview Step 2 Step 3 Step 4 Step 5 Step 6 Step 7 Conclusion Step 1
    4. 4. Exit Plan Roadmap Overview
    5. 5. Step 1 - Identify Owner Objectives <ul><li>“ I need to feel like all aspects of my planning are tied together in one coherent plan.” </li></ul><ul><li>Let's answer the following questions </li></ul><ul><li>How much longer do you want to work in the business? </li></ul><ul><li>What is the annual after-tax income you want during retirement? </li></ul><ul><li>Who do you want to transfer the business to? </li></ul><ul><li>Do you have other long-term financial goals? </li></ul><ul><ul><li>Shifting wealth to children </li></ul></ul><ul><ul><li>Reward your employees </li></ul></ul><ul><ul><li>Maintain ownership indefinitely </li></ul></ul>Step 2 Step 3 Step 4 Step 5 Step 6 Step 7 Conclusion Overview Step 1
    6. 6. Step 2 - Identify Business & Personal Financial Resources <ul><li>“ I can’t really plan for one area of my future without planning for all areas that relate to my business and personal wealth.” </li></ul><ul><li>Can Your Goals and Objectives be Met? </li></ul><ul><li>What other assets do you have to work with? </li></ul><ul><li>Is there an up-to-date financial needs analysis? </li></ul><ul><li>How much cash flow is available for your use? </li></ul><ul><li>Are you going to have to adjust your expectations? </li></ul>Step 1 Step 3 Step 4 Step 5 Step 6 Step 7 Conclusion Overview Step 2
    7. 7. Step 3 – Maximizing & Protecting Business Value <ul><li>“ I need to strengthen my company to better withstand competitive pressure.” </li></ul><ul><li>Key Value Driver Questions </li></ul><ul><li>How does your company compare with its peer group? </li></ul><ul><li>Are cash and reported earnings sustainable? </li></ul><ul><li>Are revenues one-time or recurring? </li></ul><ul><li>Is there a growth plan in place? </li></ul><ul><li>Are key managers incented with cash/stock plans </li></ul><ul><li>Is your business &quot;embedded&quot; with clients? </li></ul>Step 1 Step 2 Step 4 Step 5 Step 6 Step 7 Conclusion Overview Step 3
    8. 8. Maximizing Value Implication Owner Requirements
    9. 9. Ownership Transfer <ul><li>Third Party Sale? </li></ul><ul><li>Or, </li></ul><ul><li>Transfer to Insiders? </li></ul>
    10. 10. Business Owners Dilemma <ul><li>Baby boomer business owners are starting to retire. </li></ul><ul><ul><li>51% anticipate a sale to a third party. </li></ul></ul><ul><ul><li>18% anticipate a transfer to the next generation. </li></ul></ul><ul><ul><li>14% anticipate a management buyout. </li></ul></ul><ul><ul><li>7% expect to sell to an ESOP. </li></ul></ul><ul><ul><li>10% anticipate an IPO or will die at their desks. </li></ul></ul>Less than 25% have done any exit planning - U.S. Small Business Administration
    11. 11. Step 4 - Ownership Transfers to Third Parties <ul><li>“ I want to sell my business. Where do I start?” </li></ul><ul><li>Can I sell to a third party? </li></ul><ul><li>Is there a market for your company? </li></ul><ul><li>Can your company handle due diligence? </li></ul><ul><li>Pros </li></ul><ul><li>Results in more cash to owners </li></ul><ul><li>Minimizes financial risk at exit </li></ul><ul><li>Eliminates succession issues </li></ul><ul><li>Allows for a speedier exit </li></ul><ul><li>Cons </li></ul><ul><li>Time consuming process </li></ul><ul><li>Transaction costs </li></ul><ul><li>Loss of identity </li></ul><ul><li>Only 1 in 4 ever close </li></ul>Step 1 Step 2 Step 3 Step 5 Step 6 Step 7 Conclusion Overview Step 4
    12. 12. Step 5 - Ownership Transfers To Insiders <ul><li>“ I would certainly sell my shares to an insider if I thought I could get fair value for them.” </li></ul><ul><li>Pros </li></ul><ul><li>Frequently exit of choice </li></ul><ul><li>Maintains family legacy </li></ul><ul><li>Advantageous tax strategies </li></ul><ul><li>Enables phased retirement </li></ul><ul><li>Cons </li></ul><ul><li>Requires owner financing </li></ul><ul><li>Structuring challenge </li></ul><ul><li>Carried investment risk </li></ul><ul><li>Can/will owner disengage? </li></ul><ul><li>Is there anyone who can take over the business? </li></ul><ul><li>Can I let go of the reins? </li></ul><ul><li>Is cash flow sturdy enough to support the sale? </li></ul>Step 1 Step 2 Step 3 Step 4 Step 6 Step 7 Conclusion Overview Step 5
    13. 13. Step 6 - Business Continuity <ul><li>“ My family and I rely on the business for a significant part of our income, so I need to protect that income stream if something happens to me.” </li></ul><ul><li>What happens if: </li></ul><ul><ul><li>You die or become disabled? </li></ul></ul><ul><ul><li>One partner wants to leave before the other? </li></ul></ul><ul><ul><li>There is a divorce in the &quot;family“ structure? </li></ul></ul><ul><ul><li>Is there a Texas shootout in your buy-sell? </li></ul></ul>Step 1 Step 2 Step 3 Step 4 Step 5 Step 7 Conclusion Overview Step 6
    14. 14. Step 7 - Personal Wealth and Estate Planning <ul><li>“ My business and personal assets are so closely intertwined that I can’t plan for one without also planning for the other in the event of my death.” </li></ul><ul><li>Your business sale or transfer generates $5 million </li></ul><ul><ul><li>How much is after-tax &quot;take home“? </li></ul></ul><ul><ul><li>What will you do with the money? </li></ul></ul><ul><ul><li>Is there an investment plan? </li></ul></ul><ul><ul><li>Are you using trusts effectively? </li></ul></ul><ul><ul><li>Do you have a gifting strategy in place? </li></ul></ul>Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Conclusion Overview Step 7
    15. 15. Case Study Comparison <ul><li>Niche Marketing Services </li></ul><ul><li>$5 million, 15% growth rate, blue chip clients, profitable </li></ul><ul><li>Owner’s objective: Sale to Key Managers </li></ul><ul><li>Reviewed Valuation/Owner Expectation </li></ul><ul><li>Discussed Business Model Changes </li></ul><ul><li>Projected (Cash Flow) Transfer to Management </li></ul><ul><li>Long term Risk did not meet Owner expectations </li></ul><ul><li>Internal Sale did not meet Owner’s Needs </li></ul><ul><li>Owner’s objective: Exit via 3 rd Party Sale </li></ul><ul><li>Obtain Management Buy-in </li></ul><ul><li>Contacted 50 strategic and financial buyers </li></ul><ul><li>Three initial indications of interest </li></ul><ul><li>Further discussion let to LOI from strategic buyer </li></ul><ul><li>Created alternative deal structures </li></ul><ul><li>Led negotiation and closing process </li></ul><ul><li>Niche Synthetic Oil Blending </li></ul><ul><li>$4.4 million, 18% growth rate, long term clients, profitable </li></ul><ul><li>Owner’s objective: Transfer to Children </li></ul><ul><li>Owner plans on transferring to 3 adult children; for wealth accumulation </li></ul><ul><li>Owner gets sick </li></ul><ul><li>Children not interested in operating the business </li></ul><ul><li>Son-in-law hired to run business </li></ul><ul><li>Owner’s objective: Explore Strategic Options </li></ul><ul><li>Reviewed Valuation/Owner Expectation </li></ul><ul><li>Reviewed Value Drivers & Vulnerabilities </li></ul><ul><li>Identified strategic & financial buyers </li></ul><ul><li>Supplier ceased manufacturing product(s) </li></ul><ul><li>Business wound down/Injunctive relief sought </li></ul><ul><li>Led to lawsuit & countersuit </li></ul>Step 7 Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Conclusion Overview
    16. 16. <ul><li>As transaction advisors our goal is to help you exit your business with as much cash as possible from a sale or business transfer. </li></ul><ul><li>As former business owners and operating executives we understand the joys and burdens of ownership. We’ve walked in your shoes. </li></ul><ul><li>Since 1998 we have worked with dozens of owners of small and mid size companies in the publishing, education, manufacturing, automotive, building products, business services and consumer products industries. </li></ul><ul><li>We have completed asset sales, stock sales, business purchases, debt financings, business valuation assignments, exit planning engagements, Red Zone audits and strategic planning and operational reviews. </li></ul><ul><li>We follow a team-based approach to deliver value first . </li></ul>SEA Summary
    17. 17. The SEA Team <ul><li>Curt A. Cyliax is the co-founder and managing partner of SEA and a Certified Public Accountant. He is a veteran transaction advisor whose exit planning and transaction experience includes working with business owners in the manufacturing, distribution, and educational sectors. He is a member of the Business Enterprise Institute and speaks frequently about exit planning and private company ownership. cacyliax@se-adv.com </li></ul><ul><li>Robert W. Waring is a partner in SEA and a Certified Public Accountant.   Rob has more than 18 years of financial experience in both public accounting and senior financial management roles.   His experience is primarily with high-growth businesses in the pharmaceutical, chemicals and consumer products industries and includes responsibilities for acquisitions and divestitures as well as corporate finance work. rwwaring@se-adv.com </li></ul><ul><li>Christopher M. Suhy is a partner in SEA and a Licensed Realtor. Chris is a GRI with more than 20 years real estate experience. His prior senior management experience is in the hospitality industry. He is a business intermediary whose transaction experience includes working with business owners in the education, distribution and retail sectors. [email_address] </li></ul><ul><li>Craig O. Allsopp is the co-founder of SEA and a Certified Business Intermediary. coallsopp@se-adv.com </li></ul>