As a business owner, planning your exit strategy is as crucial as setting up the business itself.

However, with a range of options available, it can be hard to know where to start.

It’s never too soon to think about the exit strategy that’s right for you, whether that’s a sale or merger of the business, growing with the aim of listing on a public market, sale to the management team or sale to an employee ownership trust. Each comes with its own advantages and disadvantages relative to the others.

Furthermore, achieving a successful exit of your business is not always about maximising the value to the shareholders. Vendors often want to reward management, ensure their employees have job security, or maintain a long-standing family legacy, and all of these should be considered when deciding on a route to exit.

Appropriately planning for an exit is the best way to make sure you achieve the outcomes that are most important to you.

One of the most common forms of exits achieved by business owners is through Mergers and Acquisitions (M&A).

What are Mergers and Acquisitions (M&A)?

M&A is the term used for business transactions in which two or more separate companies come together under the same entity, or one company buys (acquires) another.

Many business owners do not give thought to their exit strategy and when an exit opportunity presents itself may not be in a position to achieve as beneficial an outcome as they could have appropriately planned how they had structured the business and/or its operations.

Achieving the best possible outcome can be challenging, however, and so it may take years of investment and business development to prepare your business.

We detail below five things to consider that can help to achieve the best outcome for the exit of your business.

1. Strong management team:

A competent, cohesive management team that can successfully run the business after the acquisition is a valuable asset.

Companies with strong leadership often command higher valuations, as it gives potential buyers confidence that the business can continue to operate and grow successfully post-acquisition without the need for the owner’s continued involvement.

2. Financial performance and forecasting:

Robust financial health is one of the most important factors that potential buyers will consider when looking at an acquisition.

This can include a strong balance sheet, steady revenue growth, and consistent profitability.

Potential acquirers will also be interested in reliable financial projections. Therefore, investing time in maintaining clear, detailed, and reliable financial records, and creating realistic, data-driven financial forecasts is highly recommended.

3. Operational efficiency:

Enhancing operational efficiency by streamlining processes, improving productivity, reducing waste, and managing costs effectively can significantly increase your company’s value.

A well-run, efficient business is likely to be more attractive to potential buyers, as it suggests a potential for higher profitability and lower risks post-acquisition.

It is also more likely that you will achieve a higher value for your business if it is more profitable. Buyers usually look at the level of profitability when assessing what value to make an offer at.

4. Diversified customer base:

A diversified customer base reduces dependency on a small number of customers and thus lowers risk of revenue and profits being significantly affected if the company were to lose a customer.

Buyers will often pay a premium for businesses that have a wide range of customers spread across different markets or sectors, as it implies stability and potential for growth.

Customers with good visibility on future spending (e.g. long-term contracts, rolling subscriptions, repeat scheduled ordering) are particularly valued by buyers as they give comfort over the results of the company continuing to be delivered post-acquisition.

5. Intellectual Property (IP) and competitive advantage:

Ownership of IP rights (patents, trademarks, copyrights), proprietary technology, or other unique assets that provide a competitive edge can significantly increase a company’s value.

These unique assets can offer the buyer a secure market position and the potential for higher returns.

The key to achieving the best outcome lies in understanding what potential buyers value and strategically enhancing those areas in your business, together with giving thought to what other outcomes you would like from the transaction and preparing the business accordingly.

Here to help

Choosing the right exit strategy for you and your business can be challenging, but it is better to plan sooner rather than later.

At Harbourside Corporate Finance, we are dedicated to helping business owners sell their businesses successfully and tax-efficiently.

Our corporate finance specialists are ready to guide you through any process and deliver an effective exit strategy.

For tailored advice on selling your business through M&A, contact our friends at Harbourside Corporate Finance.