Market Exit Strategy 101: Be Prepared for the Opportunity

January 22, 2013

Exit Intersection SignGreat exit opportunities are generally the result of an inbound lead, and not that of an outbound sales process.
However, an initial inquiry about your business is far from a deal. In fact, thinking that way will lead to an inquiry that goes nowhere nine times out of 10. It is no different than a product inquiry from a potential customer. There are lots of factors that will affect the outcome of the inquiry. Some of these factors are within your control and many are outside of your control.
You would be naive to think that that the inquirer is not exploring other alternatives. Just like you, acquirers are trying to make the best move for their business, and this means they will be evaluating several different options (including other acquisition opportunities) at the same time.
Consequently, you need to adopt a proactive market exit strategy that will remove as many barriers to a potential deal as possible and facilitate an efficient deal process, as this will increase the probability that an inbound inquiry will actually materialize in a deal.

Below are 5 market exit strategy tips to help you prepare for a sale opportunity prior to an inquiry:

1) Know your price tag and re-evaluate it on a regular basis

Regardless of whether or not the management team is ready to sell, it is a good practice to have all of the equity holders on the same page. This will speed up the response process and ensure that you know what it is going to take to get the other stakeholders to agree to a deal.

2) Have your financial house in order

This will eliminate any questions about the legitimacy of the accounting practices. A fiscal mess is almost always a deal breaker even if it is the result of poor accounting practicesOne way to avoid this is to start running your books like a public corporation as soon as your organization reaches a point where an acquisition is a realistic possibility.

3) Know your business inside-out and be straight with the acquisition team

The faith of the acquirer in the management team and their abilities can play a significant role in terms of whether or not an inquiry turns into an actual offer.

4) Be prepared to demonstrate your company can reach liquidity on its own

Acquirers do not want to become lending institutions. The time to profitability is generally an important factor in an acquisition; however, there are instances where this will not be necessary like a talent acquisition or customer base acquisition. Regardless, it is a good practice to keep liquidity in sight. It is a key factor for attracting future financing.

5) Be educated about your potential acquirers before they come knocking on your door

Figure out what they might be looking for, so that you can figure out how your company satisfies specific needs and can come prepared with data to showcase your company. Specially, be familiar with their strategy and culture, so that you can highlight “key fit” selling factors as well. Doing so will increase the perceived value of your organization, as it will help them see exactly how it satisfies their most pressing needs.
Great deals are a function of the sell, not just the attraction once there is interest. This is an area where many management teams leave money on the table. For more on this, refer to my previous blog series on how to identify your potential acquirers.
However, the reality is that not all companies are going to go for great exits and most entrepreneurs will need to prepare for an exit in advance to ensure there are exit options available when the time comes. The key is understanding your exit options and developing a market exit strategy around these options. For more on this, please refer to my blog series on the matter.
Next week, I will share three tips on how to start developing exit opportunities before your management team is seriously looking to exit the market.

Marketing Manager, Pricing Strategy

<strong>Brandon Hickie</strong> is Marketing Manager, Pricing Strategy at <a href="https://www.linkedin.com/">LinkedIn</a>. He previously worked at OpenView as Marketing Insights Manager. Prior to OpenView Brandon was an Associate in the competition practice at Charles River Associates where he focused on merger strategy, merger regulatory review, and antitrust litigation.