Choosing the right exit strategy for your business is one of the most important decisions you’ll make as an entrepreneur. But with so many options available, how do you know which strategy is the best fit for your goals, values and long-term vision?
We’ve created a multi-part guide to exit strategies and, in case you missed the first one, we discussed the importance of selecting the right team of advisors. When it comes to choosing the right exit, they are key in assessing the best options for you and your business.
Types of exits
Trade sale
This exit strategy involves selling your business to another company, usually within the same industry. It requires legal, financial and structural preparation, and is often seen as a “cleaner” exit, allowing the owner to walk away, sometimes with the full proceeds on day one.
Management buyout
In a management buyout (MBO), the company’s management team borrows money to buy out the current owner(s). This option can ensure continuity for customers and employees but requires a capable and willing management team. Funding may come from the company’s own resources and repaid from future profits or via a bank loan.
Employee Ownership Trust
An Employee Ownership Trust (EOT) involves transferring the majority of company shares to a trust for the benefit of employees. This ownership structure aims to boost productivity by engaging employees in the company’s success, while providing shareholders with a way to realise value, ensure leadership succession and enjoy potential tax benefits.
Private equity
Private equity firms buy companies, restructure them and aim to sell them for a profit. They raise capital from outside investors and often use debt to finance acquisitions. Depending on the firm’s strategy, this can either make the company more competitive or burden it with debt.
Other options might include family succession, an initial public offering (IPO) or an orderly winding down of the company.
Factors to consider
The right option will depend on some or all of the following:
- The size and profitability of the company;
- The sector it operates in;
- The capability and appetite of the management team;
- Timescales you are working with; and
- The tax regime at the time.
Key takeaways
Choosing the right exit strategy is essential for aligning with your business goals. Options like trade sales, management buyouts, EOTs and private equity all depend on factors like company size, industry, management capabilities, timeline and tax considerations. A trusted team of advisors can help guide you to the best option.
Get in touch
For more information or guidance on how to navigate your exit strategy, contact Cathy Revis, Head of Deal Advisory, on 02380 332 733 or email cathyrevis@fiandertovell.co.uk