The following case study is based on a true story. For owners of closely held businesses, this case study highlights the importance of engaging an experienced and professional exit planning team. Even when an exit appears to be years in the future, circumstances might force a change to the exiting owners’ timing. Therefore, we recommend that all business owners seek help from professional exit planners, like our NAVIX Consultants.
One of the four possible exit strategies is to sell the company to an outside buyer. These buyers can fall into one of two main categories: strategic buyers or financial buyers. At NAVIX, we call selling to an outside buyer an “Outie” exit strategy. Key risks for this type of transaction are timing, readiness for the actual execution of the transaction, and securing a satisfactory price and acceptable terms.
- Timing Changes – An owner’s age, shift in priorities, evolving co-owner relationships, and health declines are all reasons why owner exit timing can change.
- Industries Evolve – As technology progresses and industries change, a business may not generate significant interest from buyers if it is not positioned for industry changes.
- Golden Handcuffs – If key employees are not properly rewarded and retained, they may leave at inopportune times.
- Ownership Documents – Legal agreements between co-owners must be systematically reviewed and updated. They should address the rights of majority and minority owners.
- Professional Help – Most business owners do not have the expertise and experience to know all the potential risks and opportunities associated with exiting their business. They should seek help from a professional exit planning team.