The Contemporary Business Exit:
Keys to Success
Exiting a business now is different from doing so a few decades ago. Today’s owners must focus on some key drivers of success: financial recasting, team building, identifying intangible assets, and becoming more flexible about deal structure. In any world these increase the odds of a successful deal, but in the uncertain COVID landscape, these keys to success grow even more critical.
You must be mindful of recasting before you share your financials with anyone else. This approach is an accepted GAAP decision that enables you to remove from your financials any non-recurring, one-time company expenses such as family perks, purchasing because of fire or theft, and a vast range of other expenditures.
A newer term—earnings before interest, taxes, depreciation, amortization, and COVID (EBITDAC)–also figures prominently. You will need to show how your business was performing during the pandemic, as well as what you did to prevent major declines during COVID.
The Importance of Collaboration
Buyers want to purchase companies with quality management teams in place. If the owner makes most decisions, they’ll want hard evidence that someone else is prepared to take on that role. They’ll also want to see how agile your company was in the face of COVID. What changes did you make? Did you keep your team and the public safe, and find ways to innovate? If you can show the steps you took to survive and grow during the pandemic, your business becomes a much more enticing target.
More so than ever before, you must focus on the value drivers that make your business special. Take a long, honest look at your company, and highlight what makes it successful. Because you are so close to your business, it can be difficult for you to even see the intangibles. And of course, each buyer’s assessment of those intangibles will vary. A professional exit planner can help you take the most objective look possible.
Flexibility affords you more opportunities to move closer to a successful sale. Too much flexibility can erode deal value, though, so you must work with an M&A advisor who can help you identify key terms. Buyers will absolutely be more aggressive than ever before as they seek out great deals in turbulent times. Too much flexibility leaves you vulnerable, but insufficient flexibility will usually mean buyers move onto the next target.
About NuVescor Mergers & Acquisitions
At NuVescor, we align the interests of investors and business owners to enable the personal and financial goals of our clients. For over a decade, we have helped founders and owners of companies in the manufacturing sectors achieve maximum value for their companies. Together, we can provide business valuations, financial analysis, investment guidance, and business transaction advice for middle-market companies with revenues from $5 million to $500 million.