For many business owners, their company is more than just a source of income—it’s a part of their identity. But life is unpredictable, and circumstances can shift, prompting the need to consider an eventual exit. Whether it’s the lure of new opportunities, internal conflicts, or unexpected life events like divorce, disability, or distress, deciding to sell your business is never easy. It’s a decision that demands careful thought, dedicated time and professional guidance.
The emotional aspect
In Malta, it is often the case that the shareholder who is directly involved in the operations of the company, has also been involved in nurturing the ‘baby’ over a number of years, if not decades. This nurturing fosters an irrefutable bond between the company and the owner whose ongoing care of the business and its growth prospects render it a successful operation.
Thus, while one may take a pragmatic approach such as defining the valuation range and contractual terms to aim for in an eventual exit, this transaction is often multi-faceted and may also entail the involvement of various family members, and the assessment of suppliers, clients, and key members of staff in relation to the business operations.
Operations
Over the years, clients come to associate the owner with the business and vice versa. However, as part of the exit planning process, it is essential to separate the two identities, which may include reducing the business’ dependency on the owner. This task, often undertaken through the implementation of specific processes and appropriate delegation of authority and responsibilities.
Furthermore, through the reduction in the business’ dependence on the owner, third-party prospective acquirers, who may not be strategic investors, will be in a firmer position to acquire the business knowing that they may retain existing management to successfully operate the company.
In this context, a seller should consider undertaking a pre-due diligence exercise to assess the business’ readiness to be acquired by a third-party and to rectify any of the company’s shortcomings prior to placing the shareholding on the market.
Financial
The company valuation will provide a starting point for discussions with prospective acquirers. However, the selling shareholders will also need to assess their post-tax financial situation once they have exited the business and whether sufficient funds will be available for their post-exit lifestyle and activities.
In addition to the valuation considerations, one will also need to examine the contractual terms, and their implications, in reaching a successful conclusion to the exit transaction.
Go to market
When approaching the market to identify potential acquirers for the business, a multitude of considerations come into play such as assessing who may be an ideal acquirer, the protection of the company’s anonymity in the process, and the appropriate handling of the prospective acquirer relationship.
The identification of an ideal acquirer necessitates knowledge of the local business landscape regarding who may be interested in that particular sector, with the financial means and the willingness, to acquire the business. This task is often entrusted to a professional advisor.
Factoring in the limitations of Malta’s business landscape, maintaining anonymity is often an imperative factor for the business owners throughout the exit process to ensure that their suppliers, clients and management team, are only informed of the transaction at a strategically opportune time.
Conclusion
The process of exiting a company is a complex and time-consuming journey, starting from preparing your business to attract the right buyers to crafting a successful exit strategy. However, this effort is essential for paving the way to new beginnings and enjoying other opportunities in life.
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