The Exit Cycle

Companies perform better when they have a clear purpose. Research shows that companies with a purpose have more engaged employees, are more profitable and have more loyal customers. Investors know this. Making sure your company has a clear purpose from the beginning will help maximise the value of your exit.

Do you know what topics you should prioritise, or not prioritise, in your operations to ensure value-add in an exit? Our materiality analysis will help you understand your stakeholders’ expectations so that you can focus your efforts accordingly. In a transaction, your buyers will conduct a due diligence of your operations and performance. Make sure that you meet the criteria they will be checking, instead of using time and resources on topics with a low priority for them.

Making sure you are running in a profitable direction should be a simple analysis conducted on a recurring basis. Let us help you conduct the analysis or build a skeleton, so that you can monitor your financial performance going forward yourself. Proper financial management helps you prioritise and allocate resources to your most important opportunities.

Relevant management reporting and KPIs are key enablers in top management’s ability to lead an organisation. We often see an increased demand for quality reporting with larger series funding or major changes in ownership, as more experienced board members are often welcomed. Management team commitments to and compensation based on ESG metrics are also receiving increasing attention.

Investors love seeing consistent track records. Include external ESG reporting from the start to attract potential investors. Investors keep a watch list of potential targets years in advance, which means that your efforts will not go unnoticed even if the transaction first happens later.

As you approach your exit, you want to keep the number of red flags to a minimum. Educate your employees about good financial practice, ESG operations and other relevant areas to ensure that you are operating a healthy company with few red flags as you head towards the transaction.

Maturation is the last phase where you can credibly introduce a purpose for your company before an exit. Companies perform better when they have a clear purpose. Research shows that companies with a purpose have more engaged employees, are more profitable and have more loyal customers. Investors know this. Making sure your company has a clear purpose will help maximise the value of your exit.

Do you know what topics you should prioritise, or not prioritise, in your operations to ensure value-add in an exit? Our materiality analysis will help you understand your stakeholders’ expectations so that you can focus your efforts accordingly. In a transaction, your buyers will conduct a due diligence of your operations and performance. Make sure that you meet the criteria they will be checking, instead of using time and resources on topics with a low priority for them.

Making sure you are running in a profitable direction should be a simple analysis conducted on a recurring basis. If you do not already know what product/services, customers or geographies that drive your revenue and profitability, now is a good time. Your ability to understand and organize your operations to these, will reflect on your management’s ability to drive the business forward.

Relevant management reporting and KPIs are key enablers in top management’s ability to lead an organisation. Make sure your reporting reflects your short and long-term financial and ESG targets, and the business plan you presumable will present to investors. As companies mature, board members are often welcomed, which also increases the demand for quality reporting.

As with your financials, you want to show the investors at least a couple of years of previous, data backed ESG results. We recommend, you publish your first external ESG report at least 2-3 years before your exit. Our ESG services are designed to take you from zero to a final report– or any step in between.

As you approach your exit, you want to keep the number of red flags down to a minimum. Educate your employees about good financial practice, ESG operations and other relevant areas to ensure that you are operating a healthy company with few reg flags as you head towards the transaction.

We frequently engage with investment professionals and players in the M&A who might be interested in your business. By signing a retainer agreement with us, you are represented on all these meetings. We use them to test your exit case and are happy to connect you with potential investors.

We recommend vendor due diligences above data packs in a few cases. These cases include complex transactions or large competitive processes, where you know you will receive a significant number of questions. If you have strong financial or ESG investment case, a third-party vendor due diligence can put a quality stamp on your case. It takes from eight weeks to a year to prepare a vendor due diligence.

It requires extensive work to prepare the storytelling and content of the IM, which covers all aspect of your business, often in detail. The work often reveals nuances and details of your business that you did not know about. It might become visible that your marketing activities are supporting an unprofitable business area, or your suppliers combat your purpose, and create new strategic decisions. The IM will be sent out to prospective bidders, or in extension of your management presentation.

The management presentation is prepared by selecting the most relevant slides from the IM and adding a slide introducing the day’s presenters. From a more operational perspective, MP preparations include inviting prospective buyers, collecting signed NDAs from all attendees, finding the right location, and ordering catering.

The oral MP is an important presentation of your business to prospective buyers. Your management team needs to be well prepared and have practiced answers to potential questions. We can help your management team become comfortable with the presentation, play the devil’s advocate, and make sure your presentation aligns with your IM. We will also attend the MP to identify the topics of interest, and make sure that appropriate actions are taken before the due diligence processes start.

Depending on your type of business, investors will request certain information to make an informed decision about their interest in your investment case. Often, this data is not readily available in an organisation and needs cleaning to be digestible to externals, which is time consuming and requires a good understanding of what data will be requested. We can help you select VDR providers, structure the folders, identify and upload relevant documents and coordinate across workstreams.

We often find ourselves coaching the management teams that we support. This includes education about the process as well as listening to and navigating feelings and frustrations to make sure that you are emotionally clear and ready for an exit. In the Exit Preparation phase, we help you to understand the scope of the work that will be required during the transaction, the extra responsibilities you will take on, and how your role is likely to change post transaction.

Regardless of the size of transaction or number of bidders, each investor will ask many questions to evaluate their investment case. Many transactions take place without the employees or full management team being aware of it. This puts a large pressure on the involved people, who must operate as usual and navigating Q&A at the same time. To increase the quality of replies and thereby avoid follow-up questions, we offer to draft high-quality and strategic replies. Our drafted responses save your management time, and you just have to approve our responses.

An extensive MP and the Q&A function in a VDR can answer many of the investor’s questions. However, investors likely want to test your ability to answer non-prepared questions and assess the qualifications of the management team. We can train your ability to stay calm, and answer in a short and precise manner.

As a buyer you want to close the deal with certainty and have a structured risk identification process focused on setting the right purchase price. Conduct an ESG due diligence to identity red flags and quantify any material risks to the transaction. Like financial, legal, or technical due diligence work streams, it is a company-specific risk assessment of areas impacting the success of the transaction. Beware when selecting your advisors that the term “due diligence” is often used in an ESG context to describe something different from an ESG due diligence in the M&A space.

We often find ourselves coaching the management teams that we support. This includes listening to and navigating feelings and frustrations, helping prioritise endless to-do lists, and sometimes being the strict advisor that pauses the process, if prospective buyers lack empathy or are too pushy or aggressive in negotiations. We have seen a lot and are here to make sure that you come through the transaction as a whole person.

Being purpose-driven is value creating, as long as your employees, customers, and other stakeholders find you purpose credible. As you adjust to the new normal, it is worth revisiting your purpose to see if it still matches the company that you are now.

Going through an exit means that your stakeholders change. As they change, what is material to your stakeholders also changes. Conduct a materiality analysis to have the right priorities for your ESG efforts in this new chapter of your company. The external requirements and the internal adjustments that your company and employees go through can also significantly change the priorities of the company.

Many companies know a lot more about their financials than prior to a transaction, because of preparations and questions from investors. If you have merged with or acquired another company, financial analysis at this phase is about supporting operational decisions with financial data. We have strong capabilities within finance and performance management and are happy to help with pricing analyses, unit costs, and other financial projects.

Bringing in additional stakeholders will often lead to an increased demand for quality reporting. KPIs should be adjusted to reflect any new strategies or focus areas. This applies to ESG, financial and general progress reporting.

A transaction can result in increased external ESG reporting requirements, especially if you become listed or grow significantly in size. As part of the Post Transaction phase, you will have to understand and comply with the increased reporting requirements.

Use the external ESG report to showcase to the world what you will achieve in this chapter of the company’s life cycle. It is also a great medium for showcasing how the transaction has supported your purpose.

Post Transaction will be different depending on the transaction. In some cases, you may have two organisations becoming one. This will require a dedicated effort to ensure that everyone is on the same page. With tailor-made educational workshop and trainings, you can help your employees adjust to the new norms, systems, and cultures, and ensure a minimum level of knowledge for important areas.