Understanding & Evaluating Equity Transfer Options

Step One: Business Readiness
July 7, 2016
Exiting your business – the biggest fear of all business owners?
March 22, 2018
Business Succession Planning Melbourne

Most business owners are not aware that there are many options available to them in achieving a successful exit from your business. There are in fact at least six exit options that allow you to maximise the value of your business when you leave.

There are have two general categories for private ownership transition. The first is the internal transition, which includes intergenerational transfer, management buyouts or MBOs, sale to existing partners and sales to employees, which might be an ESOP or another form of employee transfer.

External transfer options include a sale to a third party, which could include either financial or strategic buyers, recapitalizations of the balance sheet of the company that could be done through debt or equity, or a combination of the two.

Of course, you have the opportunity to publicly list (IPO) your business however this requires extensive research and content, which is best left to my friends at the National Stock Exchange (NSX). Our focus is upon the private capital markets, which do of course have their own set of rules.

Surveys undertaken by representatives of the Exit Planning Institute have asked the question “Are you familiar with all of your transition options?” Interesting the responses typically show yes, to be 35%, “not sure” at about 37%; and “no” at around 29%.   So this would indicate that two-thirds of business owners are not sure about their options to exit. This is one of the reasons so many owners do not have exit plans, as they simply don’t know what is available to them.

Interestingly of those that responded yes they may not in fact have a full understanding of what all the available options are. So hopefully this document will make all this clear to you.

These surveys also asked the question “what best describes how you’re planning on transitioning” Of those that nominated an internal transfer (about 36% overall)

  • 58% said they were going to transfer via their family (or intergenerational),
  • 35% to management/employees, and
  • 7% said to their existing partners.

The best way to leave your business, which we will all do at some point, is when you do it with a plan. So choose your preferred exit plan and get started today on creating a plan that will lead to your business, financial and personal success

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