You are four years in. You’ve survived the initial launch phase, the cash-flow problems, the sleepless nights, the stress, the euphoria and sometimes the doldrums. The length of rope you have afforded yourself without managing to actually hang your neck in the process has probably even surprised you…….yes, you, the brave entrepreneur who has risked your money, your career, your house, your reputation and often your family life in pursuit of self made business success.
Arriving at the stage when an exit is a viable proposition means that you are in the elite club; an exclusive few who have battled hard, won the clients over, seen off the competition, achieved customer satisfaction and have actually delivered something that the world has chosen to accept…from scratch and with your very own team. If you do arrive there, I take my hat off to you, for you have climbed to the highest peaks of business success and most importantly you have arrived there at the top, completely intact. But with every mountain, there is another one ready and waiting for you to take up a new challenge. Will you sit on the peak admiring the view or will you be one of those that seeks out a new mountain to climb? If it’s the latter, you’d better start to get your head around thinking about your exit strategy pretty damned fast because I would be surprised if you haven’t already got suitors knocking at your door.
Most people think of an exit strategy as a complete departure from the enterprise which, for some people, it often is. The thought of driving off into the sunset with your new Ferrari leaving your old business behind you and starting afresh has certainly got some appeal but a new challenge may actually involve staying put and taking your “baby” to new heights through the help and support of a corporate vehicle. At Jobsite, we opted for this route through DMGT, a global media group with interests as far stretching as events, radio, trade mags, national newspapers, local papers and digital. Through collaboration with the group, we have grown the business from a single Job board (Jobsite.co.uk) with one niche board (CityJobs.com) into a vast network which includes over 400 sites and now growing internationally. We have literally turned from acquired to acquirer as we seek new exciting businesses to join with us in our journey forward.
When you have made up your mind, joining a major group such as DMGT is normally a straightforward process which involves sharing some business information with the appropriate business unit within the group. For us, we work closely with the business development team at AND who help us verify the proposition and if we agree there is a good fit, they head up the due diligence team which is responsible for verifying all the business information provided. At this time you would have appointed a legal person to represent you and again, we work with the AND legal team and an external legal firm to represent the DMGT side. I’m often asked how long this process takes and this really depends on the complexity of the business but 8 to 12 weeks would be about the average.
It’s quite rare that your business will be sold without you, for it was your management and skill (and your teams) that got it to the successful enterprise it is today, so don’t be surprised if you find yourself leaving a stake in the company. This means that you sell part of your company at an agreed valuation to the corporate group. This might be say 50% to 75%, for example. It can’t be too low (say 10%) otherwise there will be an imbalance in the amount of input the corporate will be providing versus their own return. If it’s too high then this might raise concerns that your incentive to help the business grow going forward is also too low. In general, the idea is to strike a good balance where yourself, your team and your new parent are all incentivised enough to really make the business fly. In the case of DMGT, we normally buy the entire equity stock in the business but have an “earn out” contract with the shareholders to buy out their stake in an agreed number of years at an agreed valuation formula. Some companies opt for leaving everyone with real shares but establish “Get” clauses so that shares are bought out at an agreed date for an agreed valuation formula. There are plenty of other options for structuring a deal with your chosen partner.
So, the day has arrived, it’s time to sign and you will probably find yourself having a late evening or early hours signing if all issues haven’t been agreed in advance. This normally takes place at the law firm of the corporate and if you have employees with share options, you may well be signing on their behalf via a power of attorney agreement so (unlike me once) try not to get the inevitable writers cramp as you sign hundreds of times!!
That’s it, it’s done. There will soon be a rather large cheque being paid into your bank account (so congratulations on that) and you have got yourself a partner who should help you make the value of your remaining stake that much higher if everything goes to plan.