The MCC Exit Planning Survey |
If you have not yet completed the MCC Partners Survey on Exit Planning and wish to do so, please click here. Preliminary Feedback A broad variety of business owners representing industries ranging from agriculture through to high tech responded to the MCC Survey of Exit Planning. Following are some of the preliminary indications of what business owners are thinking and what action they are taking on the subject of exit planning. Most business owners have no exit plan in any meaningful detail... The majority of respondents felt they had "no exit plan in any meaningful detail" and surprisingly this included some who have already invested from 100 to 300 hours in the process. We attribute this to the comprehensive definition of an Exit Plan that we put forward: "An exit plan is a comprehensive, step by step map to successfully exit a business at maximum value on terms most favourable to the seller. It addresses all the business, personal, financial, legal, estate and tax issues involved in preparing for and transferring a business, together with a timeline and contingency plan." Clearly while a number of business owners have addressed certain elements of an exit plan, they feel they have not addressed it in sufficient detail to meet the full requirements for themselves, their estates and their families. A myriad of professional advisors... Business owners who had not yet embarked on an exit plan emphasized an anticipated need primarily for accountants and lawyers. Those who had already embarked on a plan also felt that lawyers and accountants were important, but they added to the list, so in total their list of professional advisors included:
Accountants were typically the "Quarterback" of the Exit Plan, but citations were also received for the Investment Banker and Lawyer. It’s MCC’s observation that in selecting the QB, the business owner has to look for a leader who has a strong sense of the big picture, a confidant relationship with the business owner and an ability to manage other professionals and the complex issues that surface. Maximizing value is not the only key objective... Along with maximizing value, business owners have other priorities which are often equally as high when preparing an exit plan:
High Expectations... Appropriately upon completion of an exit plan, business owners expect to have a full understanding of all aspects of the exit and its impact. They expect to have a solid grasp of:
With this level of expectation, it is easier to understand why estimates of effort to establish an exit plan range up to 400 hours plus, including the time of all the relevant advisors. Less complex situations can and have been done with far less of an investment. Owners expect to sell to a strategic buyer... The vast majority of owners are expecting to be picked up by a strategic player, which usually means another competitor in the industry. Conventional wisdom is that these are the buyers who can afford to pay the most as they can shed some duplicated costs and enhance profitability. Increasingly, MCC is seeing financial buyers meet the valuation hurdle... The growth of the private equity marketplace, particularly in the US, has introduced a competitive dynamic which has been forcing valuations upward. These private equity players can offer a growth oriented business owner some significant advantages; such as to cash out a portion of the business value at a high valuation, maintain a carried interest in a newly capitalized (by the investor) business, and exit again as a larger business. And after the exit? Business owners have varied ambitions post exit, including
Sailing and family time were not high on the list. Please contact MCC Partners with any questions you may have on Exit Planning. We would be delighted to help. |