Aaron Lowery, Investment Manager

Thought leadership

Driving value from an exit process

Despite the disruption of Covid and Brexit, deal volumes remain high and M&A appetite amongst private equity and strategic trade acquirers is staying strong. This is great news for those considering selling their businesses and in this piece, we set out to answer the question – how do you drive maximum value from an exit?

Having a well-prepared exit plan ensures a smoother process and should maximise returns for shareholders. A proactive approach to planning the exit road map and quality vendor due diligence underpins the equity story, highlights value creation opportunities and can accelerate an M&A process, allowing shareholders to realise value sooner and potentially avoid any changes to CGT, which didn’t come in the last Budget, but seem inevitable in the short to medium term.

Exit readiness assessment

An exit readiness assessment should be performed well in advance of an expected exit – this should look at the company and its market, identify key activities and milestones to be addressed over the coming months, and highlight any weaknesses in the equity story. There are several drivers that have seen businesses brought to market earlier than anticipated including the availability of capital, higher transaction multiples and concerns over tax changes – with the results rewarding those who have ignored the external noise. The road map should be reviewed at regular intervals and address the following key questions:

  • Timing of exit – is the proposed timing still right given market dynamics, exit multiples and projected earnings growth?
  • Identification of potential buyers – who are the likely buyers and what is the exit route? Are potential buyers more likely to be trade, secondary PE investment, etc? Alternative exit options such as an IPO? What is the best path forwards?
  • Value enhancers – are there any further sources of value enhancement in addition to those identified at acquisition and during the current ownership period?

Every situation is different – sometimes a stakeholder group has the breadth and experience to carry this out by themselves – at other times it can be worth asking advice from corporate financiers.

Implementation of exit roadmap

The exit roadmap should focus management on areas such as revenue and margin enhancement, working capital optimisation, etc. and enable management to clearly articulate and support significant challenge from buyers around:

  • Equity story – can this be clearly articulated and supported with a robust financial model? A poor model can quickly lead to a loss of credibility with buyers.
  • Key buyer questions – anticipate what the key buyer questions are and consider disclosing any issues to buyers at an early stage.
  • Quality and robustness of data – does management information provide the level of detail required and is it robust enough to stand up to the challenge presented by a buyers’ advisers?
  • Covid-19 impact – was the business impacted adversely (or favourably)? Has the pandemic accelerated a shift towards a new business model? It is important to be transparent about the impact seen and the actions taken to navigate through uncertain times.

Exit process – disruption limitations

Being prepared for an exit process limits disruption and strain on the management team (and the current shareholders) during a process, this ensures management do not lose focus on the day-to-day operations of the business, which could lead to value erosion.

Vendor due diligence should be considered – it can reduce the need for buy-side due diligence while also providing clarity on key areas of the equity story and potentially accelerating an exit process. A loss of value can often occur in the final stages of a process if there is a lack of clarity around the key value drivers.


Even in the current challenging times, we are seeing high levels of deal activity and it’s vital that businesses plan for a well-executed exit process. The concepts are simple, but the benefits are clear – vendors have more control and flexibility over the timing and speed of exit giving them the capacity to focus on deal critical issues and the best chance of maximising value.

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