Finding the best exit strategy for you
What is an exit strategy? Put simply, it is the route through which you, as the owner of your business, choose to step away and enjoy the next stage of your professional life. Whether this exit is in preparation for retirement or simply so you can try something new, it is important to pick the best route for meeting your goals, be these the highest payout or the secure continuation of your legacy and team.
So, which is the best strategy for you? There are more business exit strategies than you might realise – explore our summaries of your key options below.
Mergers & Sales
Whether selling your company outright or participating in a merger, this option allows you to hand over the reins to a third party and have a clean exit from your business. Often reflecting years of dedication, inspiration and hard work, it is important to make a sale that you feel correctly renumerates you for your company’s value, and that leaves your legacy in safe hands for its next chapter.
In preparing for sale, there are many factors to consider:
- House-keeping your operations and finances, to make sure they are in good order and clear for your potential buyers to review
- Running due diligence checks to make sure you can present an accurate representation of your business operations and assets to buyers (to show off its value as well as possible, and to avoid penalties if your information was incorrect later down the line)
- Be sure of your goals: is your priority the sale amount, the sale terms, or who your business will be passed on to?
In all of this and more, it is essential to seek professional advice and support to make sure you complete your side of the process correctly and set yourself up for the best possible sale or merger you can achieve.
Management Buyouts (MBOs)
Selling to a third party isn’t for everyone. Another option is to sell to your own management team: this exit strategy has a number of advantages that appeal to many sellers, including:
- Selling to a team that already understands your business model, market and company culture, meaning you know the business is in safe hands.
- A more amicable negotiation process built on an existing relationship.
- Not needing to introduce your business operations and assets from scratch.
- Usually a faster process start-to-finish, and more freedom for flexible terms.
Whilst a smoother process with fewer variables, it is still important to complete all due diligence and to approach an MBO sale in the right way. Speak to a professional about whether this option is right for you, and how best to proceed.
Restructuring & Demergers
Rather than looking for a complete exit, you may wish to step away from only parts of your current business. Restructuring your business allows you to separate the elements you intend to keep from the elements you desire to sell. Similarly, a demerger allows you to step away from certain parts of a previous merger or joint venture.
In both cases, this can be a delicate process that requires precision and the right legal insight, so it is important to seek advice. However, this can be a highly profitable move, allowing you to avoid a total exit from your business for the sake of certain elements. Cut back to the healthy branches and prepare for stronger growth.
Business Insolvency
If your desire for a business exit strategy is related to company debt or financial difficulty, then there may be other options open to you. Navigating and resolving debt is an involved process that can impact a sale, or can be addressed in other ways. Before proceeding with one of the above options, speak with a legal corporate advisor on liquidation and administration processes, and find the most strategic financial plan for you.
Employee Ownership Trusts (EOTs)
If you truly want to see the fruits of your labours continue to pay forward to your team, you may want to explore an Employee Ownership Trust.
Whilst most people are familiar with the above exit strategies, EOTs are sometimes overlooked, but missing this fantastic option would be a mistake.
EOTs allow you to sell your business to a Trust that exists to support and benefit your company’s team. This Trust pays out in benefits and bonuses to your company employees, allowing them to profit directly from the success of your business, and opening a sense of ownership and involvement up beyond the head leadership team.
For you, an EOT means a gradual pay-out, with the company purchased over a number of years, agreed in the negotiation phase. This allows you a comfortable stream of income, whilst allowing your past team to see the benefits of the Trust sooner.
An EOT is a perfect option for anyone who:
- Would prefer a staggered payout.
- Is invested in the ongoing company culture of their business.
- Would like their team to feel directly involved in the company’s success.
- Wants to see their team rewarded for their, and your, hard work.
- Would prefer not to sell the company to an unknown third party.
EOT exits are a unique process, as there are no third-party negotiations. In addition, there are often notable tax benefits to exiting via this route.
If you would like to pursue an EOT sale or are curious to know more, get in touch with BHW’s EOT experts. As an EOT ourselves, we understand the process from both sides of the line and are ready to help you in exploring this mutually beneficial transition for your company.
Embark on your chosen exit strategy today
At BHW Solicitors, our corporate solicitors are experts in the legal and financial factors involved in any business exit strategy. We understand that this process is unique to every business, and work with you to develop a clear idea of your goals, timelines and priorities. With these clear, we can advise on the best route forwards for you, and make sure that none of the necessary stages or considerations are missed.
If you are considering a business exit and have any questions, or you know you are ready to begin, get in touch with our corporate solicitor team by using the contact form below, calling us on 0116 289 7000 or sending us an enquiry at info@bhwsolicitors.com.