Business Mentor Case Study: Discovering Ideal Exit Options

Case Study – Specialist Technical Services Company

Getting Started

Case Study introduction – Having established the business in 2012, the owners knew their business had reached a cross roads.  One shareholder was looking at retirement whilst the other “had another 20 years” in them.  But they didn’t know what options they had to enable one to extract the value out of the business to fund his retirement.

The first step was already taken in terms of handing over some of the day to day activities with the appointment of a Managing Director.  They were very conscious that their business relied on specific skills and technical knowledge and that retention of key staff was always going to be a challenge.

What happened?

The initial VALUE assessment identified a programme of improvements to the company structure, processes and management team.  This immediately started to add value by working with the in-house team (at this point no mention of exit planning was made to employees).  By working with the employees, the business started to improve engagement with them and increase the transparency of where the shareholders were taking the company and what the business goals were.

The shareholders were directors and did day jobs in the business.  There was a lot of confusion between when they were doing their job or turning up as the owners.  These 3 roles (Owners, Director, Employee) were defined and responsibilities identified.  This made it easier for the new MD to get on with doing the job he was employed to do rather than second-guessing the shareholders, which was increasingly becoming a problem.

Separately the Exit Options workshop allowed the shareholders to explore the possibilities and consequences of a number of exit strategies AND really get under the skin of the owners’ needs and wants for their personal outcomes.  This was then applied to the business, allowing the shareholders to devise a plan that worked for both of them AND the business.

Case Study Result

In 2018 the shareholders were confused and frustrated that they had got themselves into a situation that felt like they had to both sell the company for one of them to achieve what they wanted i.e. retirement and retirement funding.  Leaving the other with no business and having to either start again or possibly become an employee in the company under different controlling ownership.  This was not attractive.

Now they have a clear plan.  The roles of shareholder, director and employee and clearly defined for both of them.  They have put in place appropriate protection for their shareholding, including a shareholder agreement that fits their needs, a buy/sell agreement and some protection insurance.

The method of extracting value for each of them is understood and the timeline is agreed upon.  Both shareholders are getting what they want, having been more open about their individual requirements and desires.  Neither wanted to compromise the other, and no compromise was needed when everything was explored.

They both wanted the employees to share in the success of the future business while extracting the value they had built to date.  Yet they had never had this conversation with each other.  They’ve now built in an Employee Ownership model that engages their team to reduce any retention issues in a market with a severe skills shortage.

Overall profitability has increased and all the stakeholders are more focused and productive because they all know exactly where they fit into the organisation.  They also know how their activity adds to the value of the business and the rewards that they get for their part in the value-added.  They have a plan that is flexible enough that if something changes, they can adapt it and they are ready if an unexpected event or even an offer to buy comes out of the blue.

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