Sell, IPO, PE or Strategic Sale? Which Business Exit Strategy is Right for You?

Millions of private companies have changed hands over the past 10 years. With massive amounts of private equity capital chasing a limited number of assets, and changes to the wealth inheritance laws coming by the end of 2025, five million more companies holding $10 trillion in assets are projected to trade in the next decade.?

So if you’re a business owner considering a sale soon, it's ok to feel like a kid in a candy store. But the process for achieving your best outcome - that's where the rubber meets the road. The sobering reality is that for every successful transaction, we've seen many other private company deals collapse after the euphoria of the signed term sheet. They just never reached the closing.

In this 10-minute video, we outline some questions you might want to consider as you contemplate a sale. Think of it as a pep talk for company owners and board members...

Here’s a recap of some key questions to consider:

1. Are you selling all or part of the company?

Deciding if this is all or just partial is important not only for your own future, but strategically in determining the best acquirer/investor. Will you stick around? Will you pass control to family members? Are non-family managers part of ownership? This is crucial in helping you and your team decide whether to focus on financial investors like PE funds, where a partial sale is now a much more widespread option, or selling to a strategic, usually an all or none proposition.

2. Is your family involved?

This raises a boatload of other questions, like:

• Is the next generation ready??
• Are the founders staying on??
• Have all the family issues versus issues of who-owns-what versus issues of who-runs-the-company been worked out??Its critical to get clear on what is emotional (family), what's wealth (ownership), what's operational (control and leadership).

3. Is your business sales-driven or asset-driven?

If you are hoping for a big private equity deal, earnings are king. PE fund managers wake up asking about EBITDA and go to sleep dreaming about EBITDA. If your company’s value is driven more so by key assets and capabilities, you’re likely to be more attractive to a strategic buyer, which, let's face it - strategic means a would-be competitor looking to dominate or expand, coveting your processes, IP, technology, market share, real estate.?

And as my friend, investment banker and ESOP Queen Mary Sullivan Josephs would note, ESOPs are becoming an increasingly viable option for owners seeking to reward loyal long term employees, further fueled by more and more PE funds interested in backing ESOP owned companies.

4. Big enough for an IPO?

This requires serious earnings or market clout, far more than used to be the case. Reddit, for example, waited years, just IPO'd at $5 billion market capitalization.??

5. Will you need help??

Yes. Everyone does. Whatever your hoped for exit, sorry, but your management team is not enough because it's not what they do on a day-to-day basis. You’ll need great M&A legal, accounting, and don't forget wealth management. You may also need battle-tested top-tier executive resources in the form of a specialized, transaction expert CFO, CIO or other leadership talent.

And if that's the case, you're far more likely to succeed with project, fractional or interim leadership versus a permanent hire. An interim does not increase permanent overhead, doesn't go against your historic EBITDA (it’s a transaction-related expense).