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Exiting your business
- 1. PREPARING FOR YOUR EXIT Matt Register George Walden Principal Principal
- 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. What are your options? Not selling Selling 0% sale 100% sale
- 4. What are your options? Partial Management Sale Buyout Not selling Selling 0% sale 100% sale Minority Joint Recap Venture ESOP
- 5. What is success? • Full retirement? • Continued consulting? • Continue to run the business? • Transfer to the next generation?
- 6. Future Funding Needs Charity Family Future Lifestyle Business Opportunities Wealth
- 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. WHAT DO YOU REALLY CARE ABOUT?
- 10. Maximizing Value • Well document deal • Proven earnings • Replicable results • Growth potential / Scalability • Synergies • Minimize buyer risk
- 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. 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. 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. 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. Example 1 Company A Company B • 5 X EBITDA • 3 X EBITDA
- 16. Example 2 • $35MM in revenue • Out of favor industry • Non-standard business model • Very profitable • Limited interest from buyers
- 17. Example 3 • $35MM rev • Well run / depth / systems • Solved a buyer problem
- 18. Example 3 • 5.5 X EBITDA
- 19. Example 4 • $30MM rev • Son is victim of own success • Asset light company
- 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. 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. THANK YOU Matt Register George Walden mregister@cfaw-houston.com gwalden@cfaw-houston.com 713.302.3240 713.302.3240