Understand Exit Options
A key part of any plan is understanding the possible avenues for exit . Positioning the business to have as many viable options as possible is vital , especially if an expedited transaction is needed due to unforeseen circumstances .
For larger companies , an IPO can be an option , or acquisition by a public company is an option . However , this isn ’ t common in the lower middle market ( generally , companies under $ 100 million in annual revenues ). For these companies , paths might include :
• Recapitalization or Sale of Shares : Sale or restructuring with capital from a private investor , private equity , or venture capital firm . This option provides liquidity and can bring a strategic player that can assist with stabilization or growth .
• Acquisition or merger : A purchase by an independent buyer , a competitor , or other third party . While there may be a role or requirement on a temporary or long-term basis for the owner , often , this path can provide a complete exit for the owner .
• Management Buyout : The company ’ s existing management team buys the company from the owners / investors with the help of financing .
• Passing the business to family or successors : Some of the structuring for transfers within families can look like a recapitalization or management buyout .
• Employee Stock Ownership Plan ( ESOP ): Mostly a fit for larger companies , this option creates a program that allows employees to buy shares from owners .
• Franchising : Not typically an avenue in the freight or logistics space , but this is an avenue when there is a specific proprietary service , brand name , or business model that can be licensed to other potential owners .
• Liquidation : If a company cannot continue operations or find another exit option , or the costs or benefits of doing so need to be larger , liquidation is an exit option . This can result in a loss or minimal return , but in some cases can be the best course to follow .
Tactics for Short-Runway Transactions
When faced with a sudden need to sell , or a situation where trouble is on the horizon , it ’ s important to engage with the appropriate experts as early as possible .
As soon as it becomes evident that liabilities are exceeding assets or there are looming concerns about the ability to meet current obligations engage an expert . This will give you more options when working with banks and creditors .
You can ’ t start too early , but you can start too late
Exit planning and preparing your business can seem like a daunting task . Especially in the ever-changing landscape of freight and logistics , it is an essential process that is manageable when done over time in manageable sections .
By proactively recognizing the specialized considerations - particularly the unique challenges for last-mile delivery providers - business owners can better position themselves to achieve their goals , even when forced to sell under less-than-ideal circumstances .
Whether the objective is an investment for growth , stabilization , or a complete exit for retirement or a new venture , understanding the available options and preparing in advance is the key . CLDA
Sarah Goodman is the founder of Eminence M & A Strategies . She provides personalized guidance to lower-market business owners seeking to exit their companies with revenues between $ 5MM and $ 50MM . In addition to her advisory role , she is an active angel investor with a strong presence in the real estate investment sector . Sarah is a public speaker , contributor , and podcast guest . She is an accomplished M & A advisor whose breadth of experience and industry knowledge positions her as a formidable leader in the M & A field .
For more information , contact her at hello @ eminencestrategies . com .
34 customized logistics & delivery Magazine I winter SUMMER 2023