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Tech M&A - How to Plan for A Successful Exit

     
Mergers & Acquisitions

Budding and seasoned entrepreneurs know that building a business from the ground up and then taking it public or selling it for a handsome sum is the ultimate end game. But, just because the desire and diligence are there does not mean that it will actually come to fruition. It can take months to years of strategic planning and perseverance before the pursuit of a viable exit plan is even a possibility. And, with such fierce competition in so many sectors, especially the tech world, taking the right steps to position your company for a well-timed exit will prove vital to the success of the process. Here are some ways to ensure that your company can implement a successful exit strategy:

Engage with Mentors and Advisors

Smart leaders know what they know, and more importantly, know what they do not know and are willing to look to others for guidance. There is really no place in business for big egos or pride. There are clearly people who have succeeded through their own efforts and trial and error, but far more have done well thanks to the wisdom of others who tread before them.

To institute and eventually execute a coherent exit strategy, company leaders must engage with existing and prospective mentors and advisors. This generally comes down to networking and cultivating relationships with important professionals working within the relevant space. These are the people who will help source investors and connect the company with experts in M&A or IPOs, enhancing the chance for a successful exit.

Understand Shareholders' Goals and Expectations

The leadership team, management, and company shareholders obviously have a common interest, but their goals and expectations for how a vision is realized are not always in perfect alignment. As a result, any potential exit strategy must be adequately vetted before it can be realistically considered.

Ideally, the exit strategy will be a part of the initial pitch, and then it can be tailored as appropriate once the business begins to grow. Of course, as changes to the plan occur, they must be presented to voting shareholders to avoid problems once things really start to ramp up, as everyone has to be on the same page to see the plan through to the end.

Examine the Available Options

Although company leaders may have a specific plan in place to make a lucrative exit, it is always wise to examine other options. It may seem like an IPO is the way to go, but failing to evaluate a potential merger or acquisition may result in a missed opportunity. Even if the company sticks to its original plan, it is worth the time to look at other possibilities to ensure the right path is chosen.

And, it is critical that this examination commences as soon as the company begins to take shape. Given that most startups are hoping for a financially rewarding exit, it never hurts to incorporate some solid planning during the early stages of existence.

Learn About Valuation

In the end, most companies feel that an exit is successful when it entails a massive payout. Unfortunately, some company leaders are sorely disappointed with their sales prospects, which is often due to a lack of understanding with respect to valuation, especially the manner in which it is calculated. There is a common misconception that a steady revenue stream is sufficient to entice investors, but there has to be a sustainable business model and strategic plan as well.

The important thing to learn is that there are so many different factors that influence a company's valuation. Therefore, knowing how it will all play out beforehand so that steps can be taken to augment that value will improve the chances of a profitable exit.

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