Exit Team

Exit Team

A crucial ingredient of exit planning is the formation and composition of the entrepreneur’s “transaction team” when the timing is right to execute an exit. Ideally, this team is composed of several of the entrepreneur’s existing trusted advisors who know both the company and the entrepreneur well. The word “trust” is emphasized here because exit transactions, especially for medium-sized companies, are complex affairs calling for a multitude of decisions to be made under pressure with far reaching implications in a relatively short period of time. Good transactions are put at risk if the entrepreneur questions either the competence or loyalty of his or her advisors. Putting together a skilled and experienced transaction team the entrepreneur can trust is the first essential step to executing an exit transaction in an orderly manner.

  • The Exit Advisor is the role ExitHigh fulfills. The Exit Advisor works closely with business owners, investors, and management teams and facilitates working collaboratively with all members of the multidisciplinary team. The Exit Advisor takes ownership for constructing the overall exit plan and ensuring that the best interests of the entrepreneur are kept in the forefront by all members of the team.
  • The Financial Planner is a professional skilled at creating a personal financial plan based on the entrepreneur’s overall investment goals, objectives, and tolerance for risk. Planning for a seven or eight figure exit in a manner that ensures financial security with a margin of safety, while minimizing the tax consequences, is an important step of the exit planning process. The Certified Financial Planner (CFP) designation is an important credential to look for when selecting a financial planner.
  • The Estate Attorney works closely with the Financial Planner to help ensure tax minimization strategies are used and the wishes of the entrepreneur are honored when settling the estate. A well constructed estate plan is crucial even if an exit is several years away. Due to the illiquid nature of many private businesses, an entrepreneur’s heirs may be forced to sell the company to pay estate taxes without proper planning. Ensuring the needs of family members are met and gifting to various philanthropic causes the entrepreneur supports are also important components of an estate plan.
  • The Corporate Attorney plays an important role ensuring the business is properly structured, assets are properly protected, and the entrepreneur’s personal liability is limited. Making sure that the company has a “clean bill of health” and can complete legal due diligence with no surprises are essential ingredients for an orderly exit.
  • The Deal Attorney is a lawyer who specializes in negotiating business transactions involving a change in ownership. Good deal attorneys find ways to get a deal closed while preserving the best interests of the entrepreneur. Frankly, some attorneys have a tendency to throw up roadblocks and delay decisions. Deal attorneys are adept in finding ways around impasses and getting transactions closed under tight time frames.
  • Tax Specialists are often brought onto the team to analyze and provide guidance regarding the tax implications of various deal structures. Tax specialists can be associated with either an accounting firm or a law firm.
  • CPAs help validate and explain the company’s financial records. It is typical for sophisticated buyers to hire well known accounting firms to perform a “quality of earnings” analysis of the company’s financial performance and records. Having a good CPA on the team provides a critical resource for clarifying the company’s accounting practices and records.
  • Lenders can facilitate short-term lending needs that may arise while going through an exit. In some situations, seller financing is required to close the valuation gap or when transferring ownership to employees or family members. Having a lender on the team who knows the entrepreneur, is knowledgeable about the company, and understands the intent of the exit can make the difference between the transaction closing in a timely manner or one requiring extra innings.
  • Transaction Intermediaries take the form of either “investment bankers” or “business brokers.” The primary functions of transaction intermediaries are to identify potential buyers, assist the entrepreneur to select the “best and preferred buyer,” and driving the process forward to get the deal closed. At first glance, entrepreneurs may believe they already know who the “best” buyer is: a competitor, supplier, or a customer. In many cases, however, the best buyer is not known to the entrepreneur and this is where the expertise of transaction intermediaries enters the equation. As a general rule, business brokers specialize in finding buyers for companies with $5 million or less in revenue while investment bankers are used for companies with more than $10 million in revenue. The gap between $5 – $10 million is filled by smaller, boutique investment banks and some business brokers.
  • Insurance Specialists work with the Financial Planner and the Estate Attorney to create mechanisms to use proceeds from life insurance policies to fund the transfer of the business from one generation to the next or to provide time to sell the company in an orderly manner. Key person insurance may also need to be part of the exit plan.
  • Industrial Psychologists play a beneficial role by working to develop and prepare the management team to run the company when the entrepreneur is no longer at the helm. Team dynamics will change and the team may need to be reconfigured. Industrial psychologists can also facilitate transferring leadership responsibilities to the next generation in a constructive manner.
  • Family Systems Specialists can be key members of the team, especially when transitioning the company to the next generation. Post exit, the creation of sizable wealth and tensions that developed over the years can lead to lingering issues and complicated family dynamics. Family Systems Specialists can help identify and resolve these issues in a healthy manner.
  • The Wealth Manager specializes in managing the needs and resources of high net worth individuals and their families. Wealth managers are skilled across several areas of financial management consisting of investment management, portfolio construction, estate planning, tax minimization strategies, retirement planning, asset protection, debt management, and ensuring sufficient cash flows are always available to support the client’s lifestyle.

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