If the following generation of family members are not ready, willing or able to continue the business, it may make more sense to develop an exit plan instead of a succession plan.
In this scenario, the family may need to consider including non-family members in the management, or selling the company to third parties. These external buyers may be employees, competitors or other parties that want to operate in your sector or market.
Your business may always have been involved in acquisition, but in this case the roles could be reversed for the first time. You may have concerns about the selling process and wonder whether selling is the right decision:
- Would it be better to sell the business instead of developing a succession strategy?
- If so, what are my options: selling to a competitor, to the existing employees, should I look for a suitable private investor, venture capital company or consider an initial public offering (“IPO”)?
- How much is my business worth and how do I prepare it for the sale?
- How long will the selling process or IPO take and what are the necessary steps?
- If I sell the business, what are the consequences for me with respect to the proceeds, their distribution and my tax position?
- How can I ensure that the business survives the sale?
- How can I protect the family’s interests?
There are countless things to think about, but it is crucial to formulate a number of objectives, so that you feel confident about a sale and the proceeds thereof. Examples of possible objectives:
- Maximize the total return that your business generates.
- Realize as much cash as possible when concluding a transaction.
- Receive assistance (financial or otherwise) during strategic growth initiatives.
- Gain financial security; keep the investment risk to a minimum.
- Safeguard employment in the long term.
- Start a new venture or activity.
- Retire at an earlier or later date.
- Protect the interests of current employees, customers and suppliers.