Seller Perspective: Eight Steps to a Good Exit
Posted on November 4, 2016
Written By: Christian Annesley
In February this year the serial entrepreneur Mark Mason finalised terms to sell his app-development business, Mubaloo, to a media agencies group wanting to diversify. Here are his eight tips on delivering the right exit.
- Plan things to leave on your terms. You might feel differently, but what I wanted to avoid in exiting Mubaloo was a long earn-out period that kept me involved. When I sold a previous business I stayed on for a year, which I found too protracted. With Mubaloo, I negotiated and planned it so I could stay involved on the margins for just a few months and then walk away, barring a small boardroom role. I could do that because I left behind a committed and competent management team – and a happy buyer in IPG Mediabrands.
- Run the business you want to run – or leave. Every entrepreneur has some element of the business-growth journey they most enjoy. In my case, I know I don’t want to run a 400-person company, for example. My happiest times in business are that stage when you have five to seven people in the team and you are developing out the proposition in a meaningful way, and landing good customers. For me, that’s really exciting and fun. So work out what makes you tick – and plan your exit around that idea.
- Structure the business for a sale. One of the arts of selling a business on the right terms, for the right price, and getting the exit you want, is to create the right structures and to understand the context where your business sits. In my case, I got into apps at the right time with Mubaloo, before the market matured, which gave me a jump-start on any competition. Today, digital is pervasive. It was a good moment, therefore, to sell up to IPG Mediabrands, with its list of global clients and its need to add to its development capabilities.
- Work out what makes the business is desirable. If you want to maximise value, you need to be that piece in the puzzle that someone else wants. That’s what Mubaloo was to IPG.
- Systems add value. I created value at Mubaloo by applying my professional experience with the agency model and the right kind of management scrutiny. At Mubaloo we put management controls in place early – and held regular board meetings to keep up with business rigour. All the forecasting was measured and based on real data, not just a gut feeling for the market and where it might be headed. So we grew up fast partly by operating with a full agency structure: from early on we had account managers, user experience specialists, designers. For the customer, it meant they were never just meeting a developer, and it all adds to the value you are creating when it comes to a sale.
- Create some competition. A crucial piece in the puzzle, when it comes to a successful exit, is running the sale process in the right way. I ran a formal sales process for Mubaloo, with seven interested parties initially, which led to five presentations, three offers – and eventually to IPG Mediabrands. When it comes to negotiating on the sale price, it’s important to leave it to your advisers to manage that process. It’s their job to inject just the right element of competition and to be dry-eyed and direct throughout.
- Find a good fit. In my case, there was a clear chemistry with IPG from early on and that continued right through the process. We had one hiccup with a senior guy there who didn’t necessarily like the direction in which the purchase would take the group, but the transition was ultimately very smooth. I can’t speak highly enough of IPG.
- Be ready for a slog. With any sale, you need the emotional energy and commitment to see things through. I was confident in my corporate finance advisers, whom I used on a previous exit, and had set aside the resources to enable myself and the finance director to put in what was needed. But it still takes time – 18 months from start to finish, in my case. So you need to be ready for all that entails.
Read our full interview with Mark Mason here.