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Do You Have an Exit Strategy?

 

As most of you are aware, KN+S is very active in assisting our clients with M&A. Last year alone we assisted in over 10 transactions. It is common in the industry for smaller tech companies to be purchased by larger ones. This can lead to big payouts for the original owners and long-term success for the brand. While you may not start your company with the intention of being purchased, it is important to have all of your ducks in a row throughout the process. Are you prepared for the eventual exit from your company? Let's look at the reasons why you need to have a system in place.

  • Do you have the right management team in place? There are a variety of ways a company can transition after a buyout. And having the right management team in place can help with that transition. Is your staff ready for this big change? This includes having an experienced CFO on staff.
  • Do you have the correct team of professional advisors? You need experienced banks, lawyers, and accountants to be on YOUR team. Often you are up against huge extremes – David vs. Goliath!
  • Are your systems and processes documented? When a small tech company is purchased by a larger one, the new owners may make procedural changes to conform to their corporate culture. But they need a blueprint to start, so having documentation is critical.
  • How do your books hold up? Regardless of whether you plan to sell, having messy books is never a benefit for your business. Keep your expenses in line and your taxes correct so you can have an easy transition when the time comes. You should have audits completed for at least 3 years before you plan to sell.
  • What are your physical assets? Yes, your company is desirable for your collective knowledge and products, but there is also value in what you physically own. Do you know what that value is? And how can you transfer the ownership?
  • Do you have an advisory board? Making this kind of transition can be challenging, so surround yourself with others who can help you through the process. Creating an advisory board made up of trusted people in your circle can help you think through ideas and processes along the way.
  • Is your company valued? How do you know whether the buyout is fair? Have you gone through a formal process to determine the value of your company? Even if you don't expect to sell right away, this is a good experience to have so you know what to expect when you're ready. Know the sale metrics for similar companies.

These are all just first steps in the process of ensuring that you have the right exit strategy for your tech business. There are dozens of things to consider to ensure the shift is smooth, your reputation remains intact and your company is successful in the future. You don't have to do it alone. Contact KN+S to find out how we can help you today! We know how to do this!

 

Adapted from Industy Newsletters article. 

 

Jeffrey Solomon, C.P.A., C.V.A., Managing Shareholder at Katz, Nannis + Solomon, P.C. If you have any questions or would like to speak with one of our tax professionals, please contact our office at 781-453-8700.

 

 
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Katz Nannis + Solomon PC
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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