The Exit Strategy Consultation: Is It Time to Sell? continued -- page 2 End Game Process The process of mapping the end game begins with wanting to do it. I’ve worked with some owners who spoke about the process but clearly did not really want to go through the process. It was much simpler to do some surface discussions and write up a mini-exit strategy than it was to actually confront the demons and the horrors of selling the baby. Most owners need a confidant—some one they can fully open up to who isn’t involved in the business. Usually this isn’t the board or even trusted advisors. This is someone with whom the owner has had a trusting, personal relationship. There have been five or six owners whose paths I have crossed where this was the relationship we had. There have been three or four who actually hired me for that purpose (and those were the best situations because they were intentional and driven to complete the process). There have been several dozen who were in the superficial mode, but didn’t have their heart (or brain) in the process. The end game definition process takes discussion—of personal desires and goals; of family matters; of financial expectations; of timing; of employee skills and weaknesses; of many elements that go into the determination of the big picture end game. Mostly it takes complete honesty and a strong sense of reality. I have told many owners that the business will need five years and five million dollars of investment before it is ready to produce the type of financial expectation that they have for its sale. Few are willing to believe or buy that evaluation. They wind up getting very little in return for their denial. The end game takes expertise. At a minimum, owners need strategic, industry expertise and deep knowledge of the players within the industry. You may be better off with a gray eminence than with a young CPA or MBA. You need wisdom first. Next, you need solid financial and investment banking advice and perspectives on the market outlook for a sale. Again, experience and track record are to be commended. Investment banking professionals are specialized and bring the unique understanding of valuation, business presentation, process management, negotiation, deal structure, and closing experience. Remember, you will sell the business only once. You need someone who has sold businesses hundreds of times, and that is the value for which you pay a fee. Third, you need excellent accounting and legal advice, especially when there are issues of “C” and “S” corporation status and asset versus stock sale, real estate, taxation, environmental remediation, non-compete agreements, earn-outs, and other financial and legal matters. In short: You need a team of seasoned professionals whom you trust and with whom you are comfortable. The definition process is often a series of encounters, usually three separate days where the strategic advisor and you go through the elements of end game planning. From there, a transformational strategic plan may be necessary, including management participation, to conform the business to the defined end game. That is generally a six month process. Third, with the end game and the strategic plan in place, the investment banking portion of the process can begin and, with discussions and exploration, this can take anywhere from six months to several years. With a fully furnished investment banking plan, the accountants and lawyers can be brought in to prepare for the ultimate scrutiny of the business when buyers are identified at some point in the future. In all, the end game preparation is generally one to three years, sometimes longer. A business that is sub-optimal in performance may take some time to turn in order to ultimately produce the greatest harvest for the owner. Forensic and remedial consulting, or perhaps a partial or near-total retooling or re-staffing may be necessary. What is sad is observing a business where the owner has denied problems and then decides it is time to sell without any thought to preparation. The end game does not even remotely match the performance of the business, the team is inexperienced, and the offers received are anemic and unsatisfying. Too often, that is the disappointing culmination of a lifetime of owning and operating the business. It’s a bit like being an athlete and not staying in shape, then going to the Olympics and not even making the cut-off, and having to go home with a rest-of-your-life memory of being just an also-ran. The gold goes only to those who prepare, train, face reality, go through the pain, plan relentlessly, use great coaches with experience and understanding, assemble teams and adjust to the conditions of the competition. At the starting line, you have to visualize the race, the finish line, the winning, the victory, the podium, the gold medal: The End Game. Copyright © 2006 by Donald R. Libey. All rights reserved. May not be reproduced by any means without permission of the author. Contact Libey LLC; www.libey.com or call 877-903-9448. Previous | Next Page 1 | Page 2 |
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