Preparing for Exit Transactions

by | Feb 16, 2019

We have seen activity pick up across all forms of “exits” — including carve-outs, private company sales and IPOs. We are also continuing to see a lack of preparation for the exit process—resulting in significant value leakage and, in some cases, it is preventing a transaction from taking place. There could be nothing worse for owners attempting to execute an exit.

“Owners” in this context could be a founder, a corporate parent or a private equity firm taking a portfolio company public through an IPO; the requirements for preparation (at least financially) are similar across the board. These requirements are often not appreciated by the owners and many times this appreciation comes too late and on the back of unpleasant surprises. We recommend an exit preparation that is not a standard sell-side due diligence or a quality of earnings report that is discounted by buyers – in the case of a sale. Alternatively, a thorough excavation of the historical results needs to be performed and in the IPO scenario, it is likely that a “restatement” of results on a quarterly basis over at least the previous two years will need to be completed.

These activities are critical to ensure that you have a clear and accurate depiction of the business results, identify specific items that will impact value, and have a clear and reasonable bridge to the projections. Complete and accurate disclosures around every important issue are the sign of a well-run, professional process and this drives confidence in the business and positive momentum for the exit.

Are you fully prepared for your exit?