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A business exit strategy can be one of the most important pieces of planning for an owner looking to move away from a business, and it’s important to consider all available options. In this article we’ll explore how to exit a business, and 5 different ways to sell a business.

Full or part sale?

If you want to retire, rebalance the work/life scale, or simply want to turn all those years of hard work into financial gain, a full sale offers a straightforward clean break, often with a transition period attached to minimise disruption.

If you want to remain a part of your business’ next growth stage, a partial sale could be the solution. While most acquirers and investors will want a controlling equity stake, you could use the opportunity to support 3-5 years of growth before a final sale.

Option 1 – Sell to a third party

Most business sales are to a third party. In some cases, you may be able to walk away once the deal is signed, but in many cases a sizeable portion of the total value due to you will be deferred for a successful transition period.

It is important to seek professional advice and to generate a good choice of buyers to help you achieve the best possible deal.

Option 2 – Sell to private equity

The advantage of a PE firm looking for a majority stake, is the opportunity to realise the value of your own investment to date, and an investment into the business allows for rapid growth.

While some investors are hands-off and will leave decisions to you and your leadership team, others will want more control and lead on key strategic changes such as acquisitions, entering new markets and rapid expansion.

Option 3 – Sell to current management

Management buyouts (MBO) are popular in low-growth mature industries where it can be difficult to achieve a trade sale.

For businesses worth £1m-plus, management buyouts will typically be backed by private equity or bank financing.

Managers acquire the business assets and become the new owners, with backing from private equity, bank financing, or personal investment.

Option 4 – Asset sale

An asset sale is where you remain the legal owner of the business but sell some or all your business assets such as stock, equipment, and customer base.

An asset sale can be used to help a struggling business and improve cash flow. Deals tend to complete faster than complete sales as the due diligence process is straightforward.

Option 5 – Sell business to employees

Selling a business to staff is becoming a popular choice. Employee buyouts are typically arranged through an employee ownership trust (EOT) to make decision-making simpler. If the workforce is less than 10 people, each employee can become an individual shareholder directly.

The advantages of an employee buyout are that productivity and motivation can improve, there is little disruption to the business, and the management structure does not need to change.

Next steps

Whether you’re in the early stages of considering an exit or have already embarked on the journey, talking to a specialist advisor can help you fully prepare and take advantage of the best opportunities. Contact Partners Mark Crossfield (07780 957631) or Geoff Pinder (07717 874357) for a confidential discussion.

The MGroup

Like to know more about how The MGroup can help you or your business?

Call our offices in Oxford 01865 552 925 & Witney 01993 776 476 or use our form.

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