Business Valuation & Exit Strategies: Planning for the End Game
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Business Valuation & Exit Strategies: Planning for the End Game
- 1. Wayne Wilson & Company Business Advisory Services ___________________________________________________ Business Valuation & Exit Strategies: Planning for the End Game A Primer for Business Owners Seeking Liquidity Nov 2008 Š Wayne Wilson & Company. 1
- 2. ___________________________________________________ Begin with the END in Mind. Nov 2008 Š Wayne Wilson & Company. 2
- 3. Preliminary Questions â Environmental/ Situational ___________________________________________________ ⢠Is your business mature or still growing rapidly? ⢠Is your industry stable, consolidating or declining? ⢠Does the business generate excess cash or require continual investments? ⢠Do you wish to continue working? ⢠Is successor management in place or available? Nov 2008 Š Wayne Wilson & Company. 3
- 4. Preliminary Questions â Transactional ___________________________________________________ ⢠Are there logical buyers or investors? ⢠Do you want cash now or over time? ⢠Do you wish to retain an equity upside? ⢠Do you have other business opportunities with greater potential? ⢠Are there other personal, family or health issues? Nov 2008 Š Wayne Wilson & Company. 4
- 5. ___________________________________________________ Valuation is in the Eye of the Beholder. Nov 2008 Š Wayne Wilson & Company. 5
- 6. Valuation â Factors ___________________________________________________ ⢠Fundamentals ⢠Players ⢠Currencies Nov 2008 Š Wayne Wilson & Company. 6
- 7. Valuation â Fundamentals ___________________________________________________ ⢠Revenue size ⢠Revenue growth rate ⢠Market position / share ⢠Profitability ⢠Management / Successor Nov 2008 Š Wayne Wilson & Company. 7
- 8. Valuation â Players ___________________________________________________ ⢠Strategic buyers ⢠Financial buyers ⢠New operators ⢠Investors â Public â Private ⢠Employees / Managers Nov 2008 Š Wayne Wilson & Company. 8
- 9. Valuation â Currencies ___________________________________________________ ⢠Cash ⢠Earn outs ⢠Seller notes ⢠Stock ⢠Combinations Nov 2008 Š Wayne Wilson & Company. 9
- 10. Monetizing Your Equity* ___________________________________________________ Some Methods for Monetizing Your Equity: ⢠Dividends ⢠Hire & Retire ⢠Recaps ⢠Liquidate ⢠IPOs ⢠Sell Out ⢠MBOs *Wayne Wilson, â7 Ways to Monetize Your Equity,â Companies in Transition, June 2007. Nov 2008 Š Wayne Wilson & Company. 10
- 11. ___________________________________________________ The Value Quadrant: Trading between Value and Risk Nov 2008 Š Wayne Wilson & Company. 11
- 12. The Value Quadrant ___________________________________________________ Higher $ The Ideal Value Lower Lower Higher Time / Risk Nov 2008 Š Wayne Wilson & Company. 12
- 13. The Value Quadrant ___________________________________________________ Higher $ Value All Cash? Lower Lower Higher Time / Risk Nov 2008 Š Wayne Wilson & Company. 13
- 14. The Value Quadrant ___________________________________________________ Higher $ Financial Buyer Leveraged Recap? Value Lower Lower Higher Time / Risk Nov 2008 Š Wayne Wilson & Company. 14
- 15. ___________________________________________________ A Few Case Histories: Situations & Solutions Nov 2008 Š Wayne Wilson & Company. 15
- 16. Case #1 â Janitorial Svcs ___________________________________________________ Situation Solution ⢠Closely held ⢠Strategic sale to large ⢠Profitable national operator ⢠Strong local franchise ⢠Premium price ⢠Owner wanted to ⢠100% seller notes retire â Secured â Above market rate â Limit reinvestment risk Nov 2008 Š Wayne Wilson & Company. 16
- 17. Case #2 â Software services ___________________________________________________ Situation Solution ⢠Closely held ⢠Strategic sale to public ⢠Growing rapidly company buyer ⢠Little infrastructure ⢠Cash + earnout ⢠Needed help ⢠Continued w/ business â Div President â Options â Career path Nov 2008 Š Wayne Wilson & Company. 17
- 18. Case #3 â Radio Station Gp ___________________________________________________ Situation Solution ⢠Closely held ⢠Private equity leveraged recap ⢠Had grown rapidly via acquisitions ⢠Back-end equity stake; but No cash ⢠Struggling with heavy ⢠Continued to run the debt load during a business ⢠Downturn in ⢠Stake worth millions advertising after advertising rebound Nov 2008 Š Wayne Wilson & Company. 18
- 19. Case #4 â Cutting Tools ___________________________________________________ Situation Solution ⢠Closely held ⢠Private recap â sale to a ⢠Very profitable large conglomerate ⢠Owner healthy but ⢠Sold 80% for Cash for getting older estate liquidity & gifts ⢠Concerned about ⢠Retained 20% of equity estate planning ⢠Continued to run the business Nov 2008 Š Wayne Wilson & Company. 19
- 20. Case #5 â Construction Co. ___________________________________________________ Situation Solution ⢠One owner â wanted ⢠Management buyout to retire ⢠Bank loan, personally ⢠Very profitable guaranteed by managers ⢠Two key operating for initial payout managers ⢠Seller notes for balance ⢠Owner flexible on over several years pricing Nov 2008 Š Wayne Wilson & Company. 20
- 21. Case #6 â IT Reseller ___________________________________________________ Situation Solution ⢠Closely held ⢠Initial public offering ⢠Growing rapidly ⢠No secondary shares ⢠Needed growth capital ⢠Large tax dividend ⢠Owners wanted to ⢠Take out > $30 m of maintain control $60 m proceeds Nov 2008 Š Wayne Wilson & Company. 21
- 22. ___________________________________________________ Where Do YOU Want to Go? Nov 2008 Š Wayne Wilson & Company. 22
- 23. About Wayne Wilson ___________________________________________________ Wayne Wilson is the principal of Wayne Wilson & Company (www.waynewilson.com), a business advisory services firm providing executive coaching and advisory services on growth-related issues to owner/CEOs of middle-market companies. He has advised companies on: developing growth strategies; improving operational profitability; financing business operations; establishing corporate governance and management processes; designing management incentive compensation programs; managing mergers & acquisitions; and monetizing founder equity. Wayne can be reached at 603.763.3435 or wayne@waynewilson.com Nov 2008 Š Wayne Wilson & Company. 23