empty office as company owners are considering exiting

Heading for the exit – A private company owners’ perspective

The last 12 months have been difficult for most private company owners, leaving many wondering if it is time to exit their businesses. However, successful exit plans require a strategic and tactical approach, often requiring assistance from outside specialists.

There is no shortage of challenges and roadblocks faced this past year that are causing company owners to reconsider their future plans. Some of these challenges include:

  • Managing the ongoing impact of COVID-19
  • A change in administration
  • Concerns with employee health and wellness
  • Uncertain financial performance
  • Understanding and obtaining Paycheck Protection Program (PPP) loans
  • Maneuvering through recession and recovery
  • Keeping productivity and morale up in a remote work environment
  • Navigating supply chain and customer disruptions

Combined, these challenges have created a near perfect storm. However, despite the chaos, many companies and their owners have been resilient and resolute about getting back to business and in many cases, financial performance is almost back to early 2020 levels.

As private company owners look to 2021 and beyond, there is a growing focus on exiting the day-to-day management of their businesses. This can be done by hiring professional management, transitioning ownership and management to the “next generation” of family, or by a sale.

Other factors that are entering into the exit dialogue include:

  • I’m done – Many owners no longer want to bear the effort and risks of their business
  • Vacation home effect – Some owners who have spent time working remotely have enjoyed their flexible schedules and time with family and friends (in many cases socially distanced)
  • Death and taxes – According to Benjamin Franklin, “In this world nothing can be said to be certain, except death and taxes.” Many owners are at or near retirement and are concerned about the potential for higher corporate, personal income, capital gains and dividend taxes
  • How much is enough? – The wealth accumulated in private companies is illiquid and many owners have determined that the after tax proceeds from a sale will last for an extended period of time
  • What’s next? – Owners are wary of the next “crisis” and how it could impact their companies

While business owners are contemplating their next steps, recent market trends in the areas of executive talent and mergers and acquisitions (M&A) are making exit planning more enticing. Owners are finding either that the next generation of family members are ready to lead or seeing the increase in strong management talent available in the market. Additionally, the pent up demand for acquisitions from strategic and financial buyers are fueling growth. The stable M&A and debt markets are contributing to company valuation multiples returning to near 2019 levels with meaningful variance depending on the industry and individual company performance.

Considering an exit plan? Baker Tilly can help.

The process of deciding to exit a private business is difficult and should be done deliberately. A team approach is crucial in developing a plan. Private company owners often seek counsel from key family members, outside advisors or boards, accountants, lawyers, investment bankers and high net worth advisors.

Baker Tilly is here to assist you in evaluating your strategic and financial alternatives and can help you create a road map to a successful exit.

Contact a Baker Tilly exit-planning advisor to get started.

Michael Milani
Executive Managing Director, Principal
Gary A. Plaster
Cybersecurity and data server at a not-for-profit organization
Next up

Aligning your cybersecurity framework with your organization's mission