Exit Execution Workshop – Philadelphia

BY Basil Peters

This was the first presentation of the new Exits Execution workshop I developed for the Angel Resource Institute. I’ve been a fellow at this institute for many years and contribute new educational content as often as I can.

The Exit Execution workshop was first presented at the Angel Capital Association Annual Summit in Philadelphia on May 9, 2016.

Part 1 – Only 25% have Successful Exits

  • The Exit Execution workshop complements the earlier Exit Strategies workshop
  • This is what you need to know to start the exit process
  • Only 25% of saleable companies successfully exit
  • Most owners sell for less than they should have received
  • Many have no idea they left millions of dollars on the table
  • This is an anecdotal observation – we don’t have hard data
  • Unfortunately, we won’t have the hard data any time soon
  • Even if we had the data, the world is changing too quickly
  • We have to learn from anecdotal observation
  • Which is why meetings like this are so important

Part 2 – Accidental Exits Case Studies

  • Three recent case studies that I have permission to share
  • Vineyard Networks
  • Exit before the first year-end
  • Pre-revenue software company looking for strategic investment
  • The common theme is that these were fortunate circumstances
  • About half of exits are “accidental” – more luck than strategy
  • Just imagine how many exit opportunities we miss
  • Companies should be proactive not reactive
  • Optimum exits require strategy and planning

Part 3 – What Does This Mean For You?

  • My goal is to provide you the take-home knowledge and skills
  • To increase the probability that your companies have successful exits
  • It’s surprising how much of what is said about exits is wrong
  • There are so many myths and misperceptions
  • And quite a few dirty secrets in the industry
  • This workshop is about what works today in our current economy
  • Companies should be sold, not bought
  • The exit is just another business process
  • The first step is your “Exit Strategy”
  • It’s critically important that you check the alignment

Part 4 – Exit Timeline

  • Often the biggest question is “How long will it take?”
  • The short answer is 6 to 18 months
  • Part 1 – Before Talking to Buyers
  • Part 2 – Building the Sales Funnel
  • Part 3 – The Bidding Process
  • Part 4 – Negotiating and Closing
  • When to tell the team
  • Managing CEO deal fatigue

Part 5 – How Much Work Is An Exit?

  • A good estimate is 1 to 2 man-years for an experienced team
  • If a very smart CEO and CFO wanted to learn to do it themselves,
  • I’d triple the time estimate – at least
  • How the time invested affects the final price
  • And the probability of closing a transaction

Part 6 – The Exit Team and What It Will Cost

  • The probability of selling depends on two factors
  • Saleability includes many factors
  • The most controllable is the exit team’s capability
  • The ideal team
  • The M&A advisor’s functions
  • Why CEOs should not lead the exit
  • Selecting your M&A advisor
  • Every deal needs a very good bad guy
  • M&A advisory fees
  • How fees correlate to quality and affect price
  • Legal and accounting fees

Part 7 – Your Probabilities of Success

  • One of the dirty secrets is how often transactions fail
  • There are no statistics and nobody talks about this
  • The most likely reason for failure is “seller communications”
  • One firm said publicly that only 8% of attempted exits close
  • Some good firms brag about their 30% success rate
  • The most controllable factor is the quality of the M&A advisor
  • The lawyer can also make or break a transaction
  • It’s hard to describe a “save” if you haven’t seen one

Part 8 – Maximizing the Sale Price

  • There are many ways to maximize the price, a few are:
  • Increasing the growth rate
  • Structural value increases
  • Capitalizing on inefficient markets
  • Illuminating strategic value
  • Maintaining multiple bidders
  • Sales and negotiating skill
  • Can you really get 50% more?

Part 9 – Case Studies and Valuation Examples

  • Complete exit case studies are very rare
  • Most transactions are covered by Non Disclosure Agreements
  • The Parasun Case Study
  • The Brightside Case Study
  • The Pacinian Case Study

The PowerPoint for this talk is online here.