Business Exit Planning

Failing to plan…is planning to fail -Benjamin Franklin

In our experience, transactions are much more successful when shareholders engage in a planning and preparation process prior to exit.

Les Nemethy, CEO of Euro-Phoenix, speaks at TEDx on corporate succession

• What is the optimal form of exit: Initial Public Offering, passing the company on to the next generation, Management Buyout (MBO), selling a minority or majority interest in the company, attracting financial or strategic powers, gradual or sudden exit, etc.
• What is the optimal timing of exit?
• What steps may be taken prior to exit to enhance value?
• Is there any restructuring required prior to a transaction?
• Has there been adequate tax and estate planning?
• Are the owners’ expectations in line with market?

As mentioned, during an exit planning process, we normally prepare a diagnostic report, including a SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats), providing an objective “bird’s eye” view of how an investor would perceive your company. Our negotiation with thousands of investors over the past decades provides us with insights on how investors are likely to assess your company. Business owners may therefore obtain an independent and objective perspective on how investors are likely to perceive their company prior to going to market.

Euro-Phoenix’s CEO, Les Nemethy, literally wrote the book on Business Exit Planning; his book is an international bestseller, published by John Wiley & Sons, and has been translated into eleven languages.

www.businessexitplanningbook.com.

Value Enhancement prior to Sale

While the diagnostic report typically sets out a series of steps to potentially enhance value, Euro-Phoenix often works directly with company owners and management, in the form of consultant or coach, to help implement those steps prior to going to market.

Sellling a Company

Any decision to sell a company should be soundly rooted in strategy, with clear objectives established. Hence, we do our best to understand our clients’ objectives and help develop strategy prior to commencing any transaction. (Please also refer to the previous section, Business Exit Planning). Only by clearly defining objectives can we, as advisors, maximally support our clients.

Euro-Phoenix distinguishes itself in the following ways when selling companies and raising capital:

• We go to greater lengths than most of our competitors to prepare companies prior to commencing a transaction. We are global thought leaders in the area of Business Exit Planning;
• We underscore the importance of information disclosure to potential investors. We often run through dozens of drafts of Teaser and Information Memorandum, and polish our presentations so as to put the company’s best foot forward. There is an art to walking a fine line: effective marketing (dressing up the bride), while maintaining full, true and plain disclosure towards investors;
• We typically contact a very wide range of investors, doing everything possible to create a competitive process, whereby multiple bids are received. When appropriate, we contact hundreds of potential investors in the sale of a single company. We have an extensive proprietary database of many thousands of investors, and perform additional research and use our network of dozens of financial advisors and lawyers to identify investors;
• We carefully manage the flow of information, particularly confidential information, to minimize risk to sellers;
• We are strong negotiators, and skilled at transaction structuring.

We believe our staff’s track record — involvement in over 200 successfully closed transactions —speaks for itself.

Have you been approached by a Buyer?

Sometimes opportunity literally knocks on your door. Should you entertain such an opportunity or accept an offer? How can you know whether the offer made by an investor is the best you can achieve, if there is only one offer on the table?

In situations like this, Euro-Phoenix is prepared to react with extreme rapidity to advise owners and management and to provide our assessment on fairness of the valuation, possibly even generate alternative bids.

Just because there might be an offer on the table doesn’t mean that the deal is done. There is still a huge amount of work to be done with due diligence, data room, negotiations, etc. Allow the experts to guide you through the pitfalls.

Raising Fresh Equity

Companies may require fresh capital for a myriad of reasons, from the need to replenish capital base due to financial losses, to taking advantage of fantastic growth opportunities, or optimizing capital structure.

We are also involved in helping fast growth high-technology start-up companies raise capital from investors.

We help companies identify the best sources of financing, prepare information disclosure (teaser, information memorandum, data room, etc.), negotiate, structure and close a transaction.

Acquisitions/Buying a Business

A business may be grown either by organic growth, or by acquiring another business. Euro-Phoenix helps with both. (See our section on Greenfield Services.) We can also help assess the pros and cons of expanding via acquisition versus greenfield.

Acquiring a company may be a highly effective way to expand geographically, acquire skills or intellectual property, vertically integrate, or create synergies from horizontal integration. Euro-Phoenix has accumulated valuable experience in calculating synergies.

Compared to organic growth, an acquisition has the advantage of buying things that are “ready made”, such as market share, clientele, staff, intellectual property, equipment and real estate. Hence, growth can be much faster. One needs to assess the strength of the assets acquired, versus their cost, and compare to the cost and timeline of greenfield growth.

Services performed by Euro-Phoenix with respect to acquisitions include:

• Systematic search for acquisition targets fulfilling specific criteria within a geographic area;
• Due diligence and valuation of target company;
• Negotiation support and transaction structuring, assistance with closing.

Greenfield Services

Euro-Phoenix may assist with finding or optimizing locations for a new plant or office, including financial modeling and providing inputs for the financial model. We have helped locate premises, check availability of grants, assist with finding key staff and financing. Euro-Phoenix has considerable industry-specific knowledge and expertise.

Strategic Alliances and Joint Ventures

There may be times when a “looser” arrangement than a full acquisition or merger might make sense. For example, one might “test the waters” with the sale or exchange of a minority interest, or setting up a joint venture for a specific project. This may provide strategic exposure to another industry, vertical or horizontal integration, or a path to eventual transition or exit, once a strategic partner is proven.

Valuations

There is no single formula for valuing a company. While requiring a rigorous background in financial theory and mathematics, a good valuation also requires seasoned judgment and decades of practical experience.

We typically use a combination of valuation methods, including Discounted Cash Flow (DCF), as well as multiples of Revenues, EBITDA, and EBIT for comparable publicly listed companies and for comparable companies that were recently sold.

In our valuations we routinely seek to arrive at a definition of fair market value based on the definition of the American Society of Appraisers: “the amount at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell, each being aware of the relevant facts.”

At Euro-Phoenix, we have performed numerous valuations, and pride ourselves that where we performed valuations, followed within a short period by transactions, our track record of valuation proved remarkably accurate.

All other services

• Business Exit Planning
• Selling a Company
• Raising Fresh Equity
• Acquisitions
• Greenfield Services
• Strategic Alliances and Joint Ventures
• Valuations