Exit options

Who will be taking over your business?

Family succession

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Passing a business onto family members can be a good way to ensure its future. Family succession can however often be complicated and emotive.

Advantages of family succession

You can prepare your successor properly before you exit
You may have more opportunity to retain some involvment
It can be less disruptive
You are creating a family legacy
Family members may be more loyal to the business
Family wealth is maintained

Disadvantages of family succession

There may be no suitable family members to take over
The process can be more emotional and may cause family issues
Your successor(s) may have different goals
Succession with multiple family members can lead to diluted management and a weaker business

It’s important to be honest with yourself and your family and consider other options if family succession won’t work.

Third party sale

Advantages of a third party sale

You may get a higher price for your business.
You can exit your business completely, after a handover or earn-out period.
You may be offered a reduced but important role in the new business.
You could retain shares if the sale enhances the market position and share value of the business.
Familiarity of your sector may make the process of selling quicker and easier.
If the buyer is known to customers and suppliers, the transition to the new business less disruptive.

Disadvantages of a third party sale

The business does not operate efficiently during the sale process, having a negative short-term effect on trading.
There may be a potential negative impact on team performance, morale and attendance.
Customers may not like the potential buyer and leave, jeapordising the long term future of the business.
The sale may have a negative effect on company value depending on how the market sees the move.
If the sale doesn't go ahead, your company information has potentially been seen and used by a competitor.

Selling your business to a trade buyer or to investors can include the shares and assets and sometimes the liabilities. A third party sale means that you can withdraw from full time activity in the business, often after a handover period and let the new team take it forward.

Do your team have the vision and strategic skills to take the business forward?

Management buy-out

If you have a very strong leadership team with the right skills and who are invested in the business, then a management buy-out can be an ideal solution. After all, you know and trust them, they know the company and can continue your legacy.

Benefits of an MBO

Continuity.
Negotiations may be easier.
Sale may be faster.
Completion is often more likely than a trade sale.
You may be able to retain a minority stake in the business.

Challenges of an MBO

Your team may not be able to raise the funding required.
Your team may not be experienced enough to run the business.
Balancing your departure and negotiating your handover period.
Risk may be higher as funders will dig deep into each team member.
Insider trading risks, whereby the management team reduce profitablity prior to sale to reduce purchase price.

Company liquidation

If your company faces is in financial trouble and there isn't an option to sell the company then you may have to consider a company liquidation, in order to exit.

Liquidation is the process of closing the company down and distributing its assets. Liquidation is a formal procedure where a limited company is closed down by an appointed licensed insolvency practitioner.

The company's assets are sold (liquidated) and the revenue earnt from the sale of assets is redistributed amongst creditors and/or shareholders.

The final stage of liquidation is when the company is removed from the registerar of Companies House and will cease to exist legally.

The liquidation process can be used to bring a company to a close when it is not in financial distress. There may come a time when a company has come to the end of its life and the directors and shareholders wish to close the business and release its assets and cash value without needing to find a buyer.