Business Exit Planning

An exit strategy is one of the key building blocks of any serious, substantial business. From the moment you start your business, you should be thinking about your potential exit point and exit process. Just as importantly, you need to consider how you will build real value and worth into your business.

Many business owners do not fully understand how they can build a business with tangible value that can ultimately be sold on to another party. If and when they do realise what is required to build a saleable business asset, it will likely be too late to achieve the full potential sale value of that business.

The message is clear: start early if you want to reap maximum value when the time comes to exit your business.

There are a number of foundation stones for an effective exit plan. By ‘effective’ we mean an exit plan that facilitates and assists potential buyers’ due diligence and guards against buyers finding ways to drive down the sale price.

These foundations stones include company structure, a members’ or shareholders’ agreement (if the business has more than one owner), trading agreements with customers and suppliers, employment agreements with key personnel and, just as importantly, strong incentives that engender and maintain loyalty and commitment from those staff.

When we first engage with a client on business exit planning our first step is to gain an understanding of the history of the client’s business and how that business has developed.

We will then review your exit plan (if any such plan exists), and where you are on the exit timeline.

The next step is to conduct our own legal audit and due diligence, putting ourselves in the shoes of a potential buyer.

From there we will work with you to ensure that everything that is necessary to affect a successful exit and a maximised sale price is in place and maintained.

The advice you receive from us, certainly in legal terms, we would expect to be much the same as that from a traditional law firm. However, two things in particular make The Legal Director stand apart.

Firstly, we give legal advice from a business perspective. All of our lawyers are highly experienced in this area (not juniors, whose primary focus is often points of law, not pragmatic business considerations). We have all worked in industry, within client companies; and several of our lawyers have run, grown and sold their own businesses.

Secondly, The Legal Director is proactive rather than reactive. By proactively putting in place the necessary structures, contracts and processes for you ahead of exit, we can maximise the sale value of your business. If a traditional law firm were to come in and react to an offer from a prospective buyer, it would likely be too late to maximise and protect the value inherent in your business.

Also, if the law firm has to come in and pull together the due diligence materials in response to an offer, that may take a long time and prove very expensive.

1. By enabling the business owner or ownership group to have a very clear understanding of where the business is going, how maximum value can be accrued, what the exit plan is, and how that plan can be executed swiftly and smoothly.
2. By ensuring that the business is structured correctly and that all customer, supplier and employee relationships are set up in a way that enables business value to be maximised, before and after acquisition.
3. By enabling key senior management (such as the CEO and CFO) to focus fully on their ‘day jobs’ and achieve their business objectives — and with the assistance of a part-time Legal Director to ‘hit above their weight’ in dealings with third parties.