An exit is the moment to which many entrepreneurs look forward but many don’t fully understand the challenges. In the Know crunches the numbers.
The Economy
These are challenging times in which to sell a company.
According to the latest figures from the Office for National Statistics, the M&A market remains depressed.
For instance the total value of acquisitions in 2010 came in at £10.1bn, the lowest figure since 1994. However, there was some hope towards the end of the year, with figures for the fourth quarter showing an increase to £3.8bn when compared with £3.0bn in Q3.
Planning an Exit
Contrary to a widely held belief, exit – or the liquidity event - is not necessarily the goal that drives entrepreneurs to start and build businesses. According to Coutts own Long Goodbye survey, the biggest motivator is, very simply, a desire to build a business. Financial gains come second on the list of priorities.
The same survey finds majority of business owners find that takes up to two years to sell a business. However, there does appear to be an expectation gap, with 46% of respondents to the survey saying they thought it would be achievable in one year.
In fact, of the entrepreneurs questioned in the survey who had sold businesses, the majority (58%) spent more than a year planning. 26% got by with 6-months to a year of planning while 16% spent less than six months.
89% of the businesses taking part in the survey said it was an important to have an exit plan. However, only 33% had drawn up concrete plans at the time when the questions were asked.
Price emerged as the most important factor in the timing of a sale (cited by 32%) with readiness (15.5%) and the opportunity for a cash exit (10.5%) also coming at second and third. Only 9.5% cited the continuing security of the business as prime factor.
Exit Methods
According to the Coutts survey, the majority of exits were engineered through trade sales (52%) with the other routes breaking down as follows: new management team (15%); existing management team (11%); majority sale ( 10%); private equity (10%), other 10%.
After the Exit
The Long Goodbye found that 40% of those who achieved an exit returned to business ownership while 11% became active investors. 25% said they were happy to retire while 3% pursued philanthropy.
