Frazer Durris, founder of energy tech firm Business Wise Solutions
I set up my business in 2010 and we went through a growth story and exit a few years ago. We went on a different route, on an earn out exit.
When you realise a business is getting in a position where it is able to create value for an exit or growth, it is time to start considering what that may look like.
We wanted to put ourselves in a position, as a business, to be able to go down whichever route we thought was best at
that point in time. That could be an exit; it could be going on an acquisition trail; it could be taking on a PE investment.
An EOT is just one of those examples. So, first of all, it’s putting yourself in a position so that you’re running the business in a way that allows you to have these options when you get to a certain stage of the business journey. Then, as you’re going through that journey, it’s trying to understand those options.
The most important thing the business owner or a team can do is look ahead, understand what they need their business to look like in three-or five-years’ time to allow them to go on to the next stage, whether that’s a sale or more growth.
Jordan Kellett, group strategy director at transport and freight group EFS Global
We’ve completed around 30 acquisitions and since 2015 we have gone from a turnover of £9m to £180m. The last few years especially have been very intense from an acquisition perspective.
We use a mix of methods to identify potential targets, it is about getting yourself out there.
I’ll cold call companies, which may not turn into an acquisition for
two or three years, and build relationships with brokers and corporate finance houses. We also try to make ourselves as known as possible within the industry.
One of my proudest acquisitions, which was my first one, came from a cold call and he said he only took it because he had corporate finance and brokers emailing and calling every day and it was the first time a transport company had contacted him directly. We’d have never in a million years acquired it if we just didn’t pick up the phone.
There are some firms out there that give unrealistic expectations of value and that’s where it becomes difficult. We’re only buying profitable, well-run businesses, not basket cases or turn rounds that you can get for £1.
Laura Weldon, founder and creative director at Studio LWD
Over the last couple of years since Covid, we’ve had a lot of businesses coming to us saying they want to exit and asking what they need to do. They are looking to build value into their brand because it is a tangible asset.
They may be looking to exit in five or so years and want to know how to take the steps to move towards that.
We will work with them to map that strategy out and to help them with things like employee engagement, recruitment – how to bring all these pieces together and then
communicate that in their brand and in their marketing. When it comes to the exit it is also about seeing what the options are, so you have the strategy in mind.
People do want to ask, ‘Well, what next? What’s the value I’m building in the business?’ They are looking to get the value out of it.
Laurence O’Connor, managing director at financial advisors Financial Affairs
The big thing for me is the culture. You’re essentially handing over an entity and it is usually founder-led businesses that go into an EOT.
They want to go to a local supermarket, keep their head held high, knowing that if they bump into a customer they can say, ‘Yes, I’ve retired but the company that I grew and created has stayed.’ That’s a massive driver.
It isn’t really about the money. The money is a benefit that’s imposed by government legislation and can be removed at the drop of a hat.
An EOT gives longevity and a succession because you’re able to hand over the reins over a good period of time to enable people to learn running a business is different to working in a business. It also gives individuals who are key to running the business buy-in to the company.
The risk is that that business doesn’t enable them to take the money out and they end up going back in to support it and grow it again when they should be in retirement mode.
LANCASHIREBUSINES SV
IEW.CO.UK
Andy Platt, director at insolvency service Simply Corporate
We have seen EOTs used as part of a rescue and recovery
strategy, particularly where companies have struggled through some difficult times and have a good, solid team that has helped them get through them.
They’ll get to a point where they’ve not quite got back to where they were so, they still need to look at some sort of strategy.
Using the theory that ‘we’re all in this together’, we’ve seen shareholders use EOTs to bring the staff in. It is about everybody working with that common goal of turning things round and getting rewarded for that.
Conversations like these about the various options that are available to businesses when it comes to exit strategies are insightful and helpful and certainly give food for thought.
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DOING THE DEAL
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