In the prior parts of this five part series on the Five Keys to Successful Exit Planning we’ve covered taking care of your people, ensuring you preserve a positive legacy, and thinking about deal components before you get to the negotiating table. In this part we will be talking about the next key to a positive exit process: Timing.
#4 – Timing and Timeline
Everything takes time. Planning takes time. Preparation takes time. Execution takes time. And all of that time may just be what it takes to get to the point of having and executing a great exit plan or strategy.
Here are some timing and timeline considerations you need to keep in mind as you are putting together your exit plan.
Whether they like to admit it or not, one of the factors that delays exit planning and M&A strategy in general is hesitance at the executive level. Your company may very well be your life’s work. If you’ve worked on it for more than ten years, then it is going to be hard to let go.
This article may have even made it harder once you start thinking about your people, your legacy and what kind of compensation is worth giving all that up. You may have already asked yourself whether you are ready to move on or not, but that’s not really the right question.
Is it the “right time”?
The real question to be asking when you think about exiting your company is whether this is the right time for the company to make a transition like this.
No time is ever perfect. But have you started to feel like you maybe don’t still have the same fire you used to have? In his book Delivering Happiness Tony Hsieh reflected on how he started using the snooze button a lot and how he realized he no longer knew the face and name of everyone that worked at his company. Somewhere along the way he had checked out and hadn’t realized it. And that is how he knew it was time to go.
Nobody can tell you whether you are ready to go or not. And whether your company is ready for you to transition may be a matter of opinion. But consider one more important input: If you’ve read this far in this article, you’re probably readier than you might think.
Investor and Market Readiness
The people who put money into your company might have a whole different set of timing considerations as well. The market itself may dictate exit timing and timeline as well. The companies and investors or investor groups and even the stock market or the market for your particular industry, product or service might also have different ideas about the timing of your exit.
- Is now a good time to sell?
- Is now as good a time as any?
- Do your investors or key stakeholders agree?
While timing may not perfectly align across all of your company’s stakeholders, it’s better to make a decision. You may need to taking a vote, or get agreement to follow the recommendations of an advisor, or accept the conclusions of an “exit committee” comprised of key members of the company. But get the stakeholders to decide and avoid vacillating.
The Importance of an Advisor
Something that we’ll talk about in the next section is choosing a strong advisory firm for your transition. It should be one of the first things you do, though, and once you choose them, one of the first things you need them to do is a market assessment of your company.
- Who are your most likely suitors?
- How are they doing?
- Is your company the kind of company that will help them achieve something that is important to them?
Your company may already have an M&A strategic plan. If you don’t, you should get one assembled. If you choose the right advisory firm, they will be able to help you and will likely get something assembled faster than if you try to do it yourself.
A good advisor can prepare a solid plan with input from your team and access to your data within 4 – 6 weeks. Navvee offers an M&A Strategy Project that takes 30 days. A company trying to do it alone, especially if they have not previously engaged in any M&A or only the CEO or CFO has done any M&A work before, will take 3-6 months on the same task and not have nearly as strong a plan. Why? Access to information, experience, expertise with the M&A process, and impartial perspective.
When you are directly involved in the day to day operation of your company, trying to step back from those daily machinations is difficult. Trying to rise up and get a higher altitude perspective of the company, its competitors, the market and the aspects of the business that might be attractive to other companies or investors? Extremely difficult.
Additionally, an advisory firm does this all the time – it’s their business. That means they also have access to systems and data that are designed to provide perspective and data analysis that may be very different from the analysis that you would do for your own company.
Think about writing your own resume versus having a professional interview, review your information and then prepare a resume for you. While it’s not exactly the same thing, the quality of the result is key. This timeline question can be difficult for some companies but it shouldn’t be.
Something that many owners or key executives don’t fully understand or appreciate is that the process of preparing your business for sale AND the actual process of selling it takes time. Understanding the exit timeline is also important to a successful exit.
Developing a strategy, transition plans for leadership, determining acceptable deal components and composing acceptable buyer criteria take time. With an advisor it will take less time, but don’t plan on it taking any less than 2-3 months. If you have multiple stakeholders in your company it can take even more time.
Once you get to the point of going to market, there is even more time to prepare your company for market, getting the word out, and getting indications of interest back. Then there is the process of determining which of the potential buyers are serious, appropriate and have the necessary means to acquire your business.
This marketing and initial buyer location process can take several months as well. Plan on it being no less than 3 months, often as much as six months, and, if you have a complex business, maybe even more.
Once you are actually in the negotiation and deal making process, there is still more time required to get things done right. Negotiations take time. Conducting a proper due diligence process takes time. Getting the deal properly documented takes time. Arranging for any financing or for getting equity grants approved takes time.
Figure that the closing process itself will take at least 45 days, and more likely up to 3 months to complete. If you are a larger company and there are regulatory hurdles to overcome, it will take even longer.
In the final part of this five part series on exit planning, we’ll get into what is probably the part that trips people up the most, preparation for the exit. Preparation for the exit takes all of the first four keys and rolls them into the actual process that is required in order to successfully navigate the exit process.
Ready to Exit? Work with Us.
If you think you are ready to start discussing exit planning for your business, contact Navvee for assistance. Our services range from a simple review and advice on your plans to putting together a full strategy, to assisting with the legal work involved for the deal, to, with direct support from our partners at True North Mergers & Acquisitions, acting as your M&A Advisor and directly assisting with finding appropriate buyers and getting you the best deal for your legacy.