Plan and get the most out of a sale

by Ana Lopez

Chairman and founder at APS Global Partners Inc.| President & Founder at Medias Health Inc.| businessupdates.org Business Council influencer.

It’s no secret that companies need to have an exit strategy. But what is an exit strategy and why is it so important?

According to Investopediais an exit strategy a plan to sell or dispose of a financial or business asset when certain conditions are met or exceeded. It is used by investors, traders, venture capitalists and entrepreneurs.

Four types of exit strategies

There are four main types of exit strategies that companies use to sell or dispose of their assets: initial public offering (IPO), mergers and acquisitions (M&A), private equity investments, and private investments in public equity (PIPE).

By investing in an exit strategy, companies have the potential to unlock tremendous value. But careful thought must be taken when analyzing a company’s assets and liabilities.

First public offering

Going public through an initial public offering (IPO) gives a company access to capital and exposure to stock markets or stock exchanges. It is a comprehensive process of complying with disclosure requirements, regulating all transactions according to trading rules and offering securities or other forms of security for purchase by the general investing public.

Ultimately, an IPO is useful in industries where value depends on consumer perception because it allows companies to quickly gain widespread visibility with minimal risk and effort.

Mergers and acquisitions

Mergers and acquisitions (M&A) are transactions in which one company buys all or most of another company’s assets for strategic or financial reasons. This is an increasingly popular business strategy. However, these transactions often involve a host of legal, tax and commercial considerations that can be complicated for acquirers to navigate without the help of experienced investment bankers.

Private Equity investment

Private equity investing is the acquisition of companies by private equity firms, which specialize in making investments in exchange for an ownership interest in those companies. The shares are generally not available to the public. These companies acquire an equity interest in a company by purchasing the shares from existing shareholders and lenders and then exercising their right to purchase more shares at a later date.

All in all, private equity investing offers a great path for companies looking to gain more control over business decisions without sacrificing access to unique resources for high returns.

Private investment in public assets

Private investment in public equity (PIPE) refers to private investment in public equity (as opposed to private equity investment in private companies) where large institutional investors buy securities in newly formed companies at significantly lower prices. PIPE is done primarily to access the company’s future returns at a relatively low risk.

PIPE could be an ideal exit strategy for companies in fast-moving industries or companies that require long-term investment in research and development

When planning an exit strategy

Drawing up an exit strategy is the ultimate opportunity for you as an entrepreneur to reflect on your successes and challenges. An effective plan will enable you to face your retirement or further career paths with clarity, free from unpleasant surprises along the way, by properly disposing of your assets ahead of time.

The strategic planning process you use to develop your exit strategy should include the following steps.

First, it is essential to have a clear vision of where your business will be in the future. What does success look like? Are you aiming for an increase in profitability over time so that it can generate maximum value when sold, or are there other goals, such as transferring management responsibility to another investor moving forward? By defining these objectives now, you can ensure that everyone is working towards the same result.

Next, you need to determine who will be involved in your company’s sales process. Do you take an active role in the sales process or do you leave the details to the professionals? How do you select professionals that best suit your needs?

And finally, you need to create an action plan to help you achieve your goals.

Each of these steps is essential to successfully achieving your goals. Make sure you devote the right time and resources to each task if you want to ensure that your exit strategy is as effective as possible.

Get the most value from a sale

Don’t settle for less than what your company deserves. Take the time to explore all possible opportunities and never forget that you don’t have to accept any offer immediately. Thoroughly research potential buyers before making a decision to ensure a fair deal. In my experience, it’s almost always worth the wait.

Planning for all possible angles of a sale should be part of your process. Think about when to sell, what kind of business you’re divesting from, and which potential buyers might be interested. A well-executed strategy in advance sets you up for long-term success.

Using Experts

Once you’re ready to start looking for a buyer for your business, I think talking to a business broker is an essential step in getting ready. They can assess where your sales process stands and help you discover potential buyers, while making sure everyone involved gets fair terms. Their insights can prove invaluable on this journey, saving you time and stress.

It is also essential to have professional guidance from a lawyer as you navigate this complex process. They can help clarify terms of sale, secure fair transactions between both parties, address potential tax implications of the purchase, and ensure legal rights are enforced everywhere.

Finally, a reliable accountant is a must-have for any business sale. They can set up the necessary bills, sort out your finances, and help avoid future tax problems, all while protecting you from potential post-closing buyer disputes.

With these experts by your side, you are more likely to exit the trade on a solid foundation.

In general, to get the best dollar for your business, you should start preparing well in advance of the actual sale and think carefully about the options available to you.


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