A pre-exit involves selling your company in phases. You initially sell part of your company but keep a minority or majority stake in your company. You agree on a period of around 4 to 8 years usually, during which time you stay with the company before it is fully transferred to the new owner or new buyer. A pre-exit enables you to secure part of your assets, yet still, be involved in the development and growth of your company. Moreover, it means you can make the acquisition gradual and structured, and reduce the impact an acquisition has on – for example – your staff and customers
In a pre-exit, you and the buyer set up a new company that takes over all the shares in your company. In most cases, the buyer takes a majority stake in the company at that point. For example, they may pay for 70% of the shares, which then goes to you as capital. Offsetting this with your own deposit means that you immediately secure additional capital for the future.
When is a pre-exit interesting for me?
A pre-exit is interesting if you don’t want to sell your company in its entirety just yet, but you do want to prepare for it. There might be various reasons for this; the most common ones are below:
Your retirement age is approaching, or you want to work less for a different reason. This is when a pre-exit is the perfect solution. You will still be involved in your company for a while, still contribute to its growth, and ensure that the succession is in good hands. You immediately secure a part of your assets this way, as you have already initiated the sale, and collect part of the sales value.
There are risks involved if your assets are fully or almost fully tied up in your company. The value of your company can fluctuate and your market segment may experience a dip. A pre-exit spreads these risks, and you can immediately secure a part of the assets without taking money from the business.
A pre-exit also offers the advantage of having another party step in with knowledge and expertise that you may not yet have in-house. What’s more, the buyer brings their own network or even their own clients. These are all aspects that can contribute to the growth of your company, and therefore the value of your company. You may also enter into a pre-exit agreement with a larger company in your sector in order to consolidate and secure the future of your business.
A pre-exit is also an injection of capital. The extra capital the acquisition brings to the company could be the key to further growth. It means you do not need to bring in any equity or investments.
The advantages of a pre-exit
A pre-exit is a sales strategy with many advantages for you as an entrepreneur. After all, you are in control and remain involved in your business. This is often very reassuring on both a business and personal level. For you as an entrepreneur, a pre-exit offers the following advantages (and more):
- You remain active within your company
- Your employees can get used to the acquisition and you remain in control of their well-being
- You can cash in part of the business value immediately
- It can contribute to the growth of your company
- You bring in (missing) knowledge and expertise
- Risk spreading
Who will I sell my company to?
In the majority of pre-exits, the acquiring party is a private equity fund. Other possible buyers could be individuals or other companies. Marktlink has an extensive network of potential buyers and our consultants will actively search outside of our own network too. Of course, you might already have a suitable buyer in mind. In that case, we will be happy to assist you in approaching this party or these parties.
In a pre-exit, you remain involved in the company, and this is why the right rapport is very important. Read below about a real-life example of a successful pre-exit.
Arrange a pre-exit with the help of a specialist
Our specialists will be happy to help you find the right acquisition partner. Thanks to our many years of experience and our large network, we know exactly what is needed for a successful pre-exit. Do not hesitate to make an appointment with one of our specialists if you are interested in our sales support.