Page 13 - Exit feature 2017 Final new amended new

PAGE 10

MEMBER INSIGHT: MEMBER INSIGHT:
SUCCESSION PLANNING PREPARING FOR EXIT
Lara Morgan, Pacific Direct

Alex Farrell, former Pacific Direct, which manufactures
MD of the IT Job and sells branded toiletries for the Lara Morgan
Board and a hotel industry, was approached as a
member of The young business to sell to a big player.
Supper Club, It resisted, then tried to sell and failed.
sold her business It was then actively taken to market in
in a trade sale 2008 and sold. Here are three lessons
conducted by learned from selling her business from
Cavendish Corporate Finance, in 2013. founder Lara Morgan:
She knew that as she prepared her
business for sale, the people acquiring • Do not go into the stress of an exit
her business would shine a spotlight on without absolute clarity around your
the senior team. own terms and conditions of the deal.
Have a BATNA (best alternative to a
If it wasn’t clear the business could negotiated agreement) and write down
continue successfully without me, it the key terms that you personally will
would put the sale at risk. After ten accept before walking away.
years working together, I was close
to each individually, but they weren’t • Bolt the value to the floor for
working together as a team. It was like maximum return. Licenses, contracts
the spokes of a wheel, each with a direct with decent term time left, staff with
line to me but not communicating with good contracts, and all other assets
each other. They were siloed and that must be secured. Do not leave these
had to change. I had worked with some difficult conversations late and do not
people for so long it was impossible to be doing them whilst you are trying to
be objective. maximize your value.

I brought in an external coach, who • Be very clear, habitual decisions you
helped me see where each individual made when it was your company will
could develop and I encouraged them to no longer be yours. Broken warranties
work together without relying on me. By should be insured against. It may save
relinquishing control, I created a more you a fortune and the deal is not over
collegiate atmosphere in the business. until the cash is in the bank.

investors can vary enormously and the legal investors and strong-willed entrepreneurs
documents can be complex. work and the consequences when they
clash. I offer up three questions for
A good advisor can be invaluable to help founders/ entrepreneurs to ask themselves
understand what is being signed up to and what before walking down the investment path
the consequences could be if things don’t go to with private equity:
plan. It’s a tricky balance to get right between
a plan that excites investors and a plan that is 1. Can your business grow top / bottom-line
too ambitious and causes problems because by more than 5% ahead of plan? Getting
targets are not met. Due diligence focuses on ahead of plan is key to good relations.
your business but equally important is that you
due diligence your potential investors just as 2. Can you share your business with others
carefully. etc.venues opened its and accept or challenge advice? Some
flagship event space at
County Hall in London entrepreneurs really struggle with this.
MUTUAL MOTIVATIONS in January 2017, adding
Private equity has a mixed reputation which, in another floor and 25,000 3. Can you write and deliver against a
my view, is mostly around a lack of sqft in May. It has since sensible business plan? Over-promising and
announced a new venue
understanding between how professional space in Manchester. under-delivering leads to trouble.