Exit strategies for family business

Exit strategies for family business

Many family business owners look to reap the rewards of their efforts over the years. There are a myriad of exit strategies that need to be considered.

Partner, Global Head of Family Business

KPMG in France


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Files and papers on the table

After many years of hard work and most likely plenty of sacrifices, many family business owners look to reap the rewards of their efforts over the years:

  • What will happen to the business when I decide to move on?
  • Should the business be sold?
  • Will my children want to carry on with the business, and, if so, is there a successor ready to assume the leadership and how will this be funded?
  • Would the current management team be interested in buying the business?
  • Should the business become a publicly listed company?
  • How do I help ensure the maximum return is received from the business?

Sometimes exit strategies or exit planning rather than succession planning is needed as there isn’t a next generation of family members who are ready, willing or able to continue the family business. In this case, you may need to consider employing non-family members as managers or selling the business to external parties. The non-family buyers could be employees, competitors or other parties wishing to enter your industry or market.

You may be anxious about the sales process or even question if it is the right thing to do.

Questions you might be asking

  • Would it be better to sell the business than adopt a succession strategy?
  • If yes, what are my options; do I pursue a trade sale, sell to existing employees, find a suitable private equity backer or even consider an IPO?
  • What is my business worth, and how do I get it ready for sale?
  • How long could it take to undergo a sale or an IPO ... and what is the process?
  • If I sell what are the implications for me around the proceeds of the sale, how I distribute them and my tax situation?
  • How can I ensure that the business survives after a sale?
  • How do I protect the family’s interests going forward?

A common response from many people in business today is that they always have an eye on the market for the right offer for their business. There are many things to consider, but also some clear objectives that you can put in place so that you’re comfortable with the reasons for the sale and the return from it. Your objectives could include:

  • maximising the total value received for your business
  • maximising the cash received on closing of a transaction
  • receiving support (financial or other) for strategic growth initiatives
  • achieving financial security and minimisation of investment risk
  • securing long-term employment
  • pursuing a new venture or a hobby, retiring early (or late)
  • preserving the well-being of existing employees, customers and suppliers.

Selling the family business

For many, the sale of a private company is the culmination of a lifetime’s work. Often, this will be a once-in-a-lifetime transaction – with just one opportunity to get it right. Sale process steps include:

  • identifying and prioritising potential buyers
  • initiating confidential contact with prospective buyers to ascertain their interest
  • developing pricing
  • reviewing the proposed transaction and the potential return
  • drafting required documents
  • reviewing offers
  • managing your tax position
  • closing the deal.

Fully preparing the business for your exit is not a small task – it’s a stressful and risky undertaking, with tax implications as well – and many family business owners benefit from professional advice.

As you contemplate this major life change and consider your options to exit the family business, you need to understand what drives value in business in today’s market and what potential buyers and investors are looking for.

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