When To Start Thinking About Your Board’s Exit

As a non-executive director, It is NEVER too early to start thinking about the sale of the business. In fact, the best possible time to start thinking about an exit is from the moment you are appointed to the board.

07-03-2019

Business

As a non-executive director, It is NEVER too early to start thinking about the sale of the business. In fact, the best possible time to start thinking about an exit is from the moment you are appointed to the board.

It is fair to say that some businesses are doomed to be ‘unsalable’ from the very beginning. This does not mean to say these are bad businesses, but rather that there are unavoidable factors that make them unattractive to potential buyers.

The saleability of certain businesses can be compromised, for example, by the industry they operate in, the nature of their operations or their customer base. For instance, a capital-intensive business with reliance on a single customer is unlikely to be readily sellable, regardless of how well it is performing.

In an ideal world, astute boards will consider exit scenarios far earlier than they plan to initiate the sale; the majority, however, only start to think about an exit 2-3 years before the big event. This still provides plenty of time to allow to make comprehensive preparations to ensure the business is properly positioned for buy out.

Here at Bluebox, we simplify this process by splitting in two categories the issues that need addressing prior to an exit. While these procedures are often rushed through, our view is that you need at least a year to ensure that you have covered all eventualities by carrying out the following actions:

i) Ensuring readiness for due diligence

Preparation is required to ensure that the business can “survive” the inevitable due diligence exercise of an incoming buyer. The rigours of this should not be under-estimated.

Checking matters such as ownership of all necessary intellectual property, legal contracts, staffing arrangements and systems will be vital at this stage. Clearly, you need to know what an acquirer will be looking for, but with guidance from experts you can ensure that the business is properly prepared and ready for sale.

ii) Positioning the business and creating an opportunity map to maximise value

Positioning the business in the right way is critical to enhancing value in advance of an exit. An acquirer is not buying the past, they are buying the future. While the historic performance of a business can be used as an indicator of fitness, projected growth can almost always be presented in a specific and credible way to ensure you maximise value.

Positioning the business in the right way requires an expert eye. It is all about demonstrating to a buyer that the business is primed for growth and the opportunities you are presenting are the ones that they want to see.

Industry statistics show that only 1 in 9 business sale mandates successfully completes. By addressing the above, you will not only maximise value, but also greatly enhance the chances of a successful deal.

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