MAKING THE MOST OF YOUR EXIT STRATEGY
I have often mentioned in my articles the need to keep an open mind when taking your business to market. Don’t be too particular about what you want the outcome to look like, and keep an open mind about who you may meet and what kind of deal you might do.
An interesting illustration of how this may play out can be seen in the experiences of an owner of a large clothing manufacturer. Initially, he went to market looking to sell to a trade acquirer. He was tired of the grind and wanted to exit in order to reduce his exposure to his own business, as well as to the local economy. The market liked his business, but he did not find a suitor with whom he could align and who was willing to pay the price he felt the business was worth. At that point we changed the strategy, as we realised that our client did not want a full exit, but rather to diversify his wealth.
The solution lay in finding the right private equity partner who could buy into his vision. The result ticked all the right boxes: the business owner sold around 30% of his business to a private equity fund – one which bought into his vision of becoming a major supplier to the local retailers.
In the process, not only did our client get paid a handsome amount for his shares, but he was also able to change his growth strategy from one of organic growth to one of growth through acquisition. He now has an M&A team as part of his shareholding structure and is able to draw on their wealth of experience in deal-making to significantly accelerate growth. In addition, he has been able to take the cash he earned through the sale and invest it in portfolios with less exposure to the South African retail sector.
The type of scenario described above is often overlooked in our determination to find synergy and sell to a party who “can do better with your business than you can”. If you are looking for growth, and also looking to diversify your wealth, there can be a great solution, especially if you are open to possibilities you may not yet have considered. With this solution, you may well find an option where you can grow in ways you were never able to grow before – through access to acquisition skills, as well as access to funding solutions that were not previously available. If things turn out right, you will be able to take some cash (and some risk) off the table, and diversify your wealth in the same move.