Exiting your business

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Here is a class I gave to business owners about exiting their businesses.

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Exiting your business

  1. 1. PREPARING FOR YOUREXITMatt Register George WaldenPrincipal Principal
  2. 2. Legal Notice • This is not an offer to sell or a solicitation of an offer to buy securities. • Securities are offered through Corporate Finance Securities, Inc. • Corporate Finance Securities, Inc. is a member firm of FINRA and SIPC.
  3. 3. What are your options?Not selling Selling 0% sale 100% sale
  4. 4. What are your options? Partial Management Sale BuyoutNot selling Selling 0% sale 100% sale Minority Joint Recap Venture ESOP
  5. 5. What is success?• Full retirement?• Continued consulting?• Continue to run the business?• Transfer to the next generation?
  6. 6. Future Funding Needs Charity Family Future Lifestyle Business Opportunities Wealth
  7. 7. WHAT IS YOURNUMBER?
  8. 8. Who would buy your company?Strategic Financial• Usually not looking for partners • Looking for return• Your business solves a problem • Not interested in running a• Different math business • Needs management team in place
  9. 9. WHAT DO YOU REALLYCARE ABOUT?
  10. 10. Maximizing Value• Well document deal• Proven earnings• Replicable results• Growth potential / Scalability• Synergies• Minimize buyer risk
  11. 11. Minimize Buyer Risk• Audited financials • Provable • Manage for taxes, but prove earnings• Bench strength • Redundancy • Sustainability• Systems in place • Less reliance on personality • More systems
  12. 12. Pre-transaction Planning• Legal • Trusts • Non-profits • Gifts• Wealth Management • Determining your number• Strategic • Right business • Right clients• HR • Knowledge management • Depth of leadership
  13. 13. The Cost of No Plan• Value of business• Risk to buyer• Stress for family• Uncertainty for customers• Uncertainty for employees• Uncertainty for vendors• Fewer options / Less control
  14. 14. Example 1 Company A Company B• Contract Machining • Contract Machining • OEM Drilling equipment • OEM Drilling equipment• $16MM rev • $5MM rev• Proven earnings • Run on a “yellow legal• Management Team pad”• Synergies with buyer • Customer concentration • No plan • No team • No time
  15. 15. Example 1Company A Company B• 5 X EBITDA • 3 X EBITDA
  16. 16. Example 2• $35MM in revenue• Out of favor industry• Non-standard business model• Very profitable• Limited interest from buyers
  17. 17. Example 3• $35MM rev• Well run / depth / systems• Solved a buyer problem
  18. 18. Example 3• 5.5 X EBITDA
  19. 19. Example 4• $30MM rev• Son is victim of own success• Asset light company
  20. 20. Example 4• Minority recap• Father retains some equity• Son gifted equity• Son earns equity from PEG Father 25% PEG Son 45% 30% Company
  21. 21. Your Transaction Team• Investment Bank • Run an efficient auction • Generate interest • Negotiation• Tax Accountant• Attorney • Reps and warrantees • Contracts• Insurance • Legacy liability coverage• Wealth Manager • Make money with money
  22. 22. THANK YOUMatt Register George Waldenmregister@cfaw-houston.com gwalden@cfaw-houston.com713.302.3240 713.302.3240

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