If neither a family transition, nor a Management Buyout, is in the cards, a Sale might be the way to go.

A sale of the business ownership can take different forms including a sale of assets or shares, or the lesser used Initial Public Offering (IPO). Often the buyer is a competitor in the same industry. This exit strategy is often pursued when no successor is available or willing as well as to finance retirement or re-deploy the capital into other, new ventures.

There are three main considerations worth noting in relation to a sale.

• 1) Providing pre-sale details - If a deal does not close, the prospective buyer may have information which is advantageous to them, enabling them to move ahead in your market without you.
• 2) More demanding third-party sale structure - An outside buyer will likely want written assurances that there are no liens or that assets have not pledged as security, as well as a longer payment period or “earn-out” based on performance
• 3) “Testing” the open market - It is generally not wise to announce succession plans unless you truly intend to sell. It makes public your intention to get out of the business, which may increase competitive pressure.

The starting point here is to consider what your primary transition objective is. If it is to finance retirement or to re-deploy the capital elsewhere to start a new venture, then exploring this exit strategy makes sense. You should also perform a valuation of the company to understand what it is actually worth. That said, having your succession plan prepared in advance provides easy access to the financials, business valuation and legal documentation required to facilitate a third-party sale.