Eight tips for successful succession planning

22 February 2024

While business exits rarely come as a complete surprise to their owners, not everybody is fully prepared when they come along. Here we outline some of the top tips for successful succession planning. 

1. Preparation

A good sales process should anticipate buyers’ potential concerns and due-diligence requirements, allowing momentum and competitive tension to build throughout the process.

 2. Early engagement with lenders

The depth of information required is generally commensurate with the size and complexity of the deal, but early engagement will ensure you know what information will be required to progress a transaction.

3. Founder dependency

Over-dependence on a business owner looking to exit can raise issues in diligence – ensuring there is an experienced and broad management team can mitigate this significantly.

4. Shareholder objectives

Key shareholder objectives such as their level of involvement in the business post-transaction should be addressed early in discussions with buyers because this could influence the transaction structure or its terms.

5. Explaining the business model

The key to maximising value in a transaction is to articulate the value drivers of the business clearly. This will help you stand out to prospective buyers, so spending time on this is vital.

6. Building competitive tension

An efficient and tightly run process will increase competitive tension between bidders and maximise valuation. Presenting an efficient and tightly run process to a wide pool of potential buyers can drive competitive tension among bidders and maximise your valuation.

7. MBO success

Think objectively about the transition of ownership – what intangibles could the business lose in terms of relationships, skills or tacit knowledge? How does the new ownership compensate for this? By addressing these transition risks upfront, the new management team/controlling shareholders can show a lender or investor that they have identified and mitigated against these risks.

8. Relocating post-exit

Moving overseas is on the wish-list for many business owners post-exit but you should consider practicalities carefully. While the climate and lifestyle may be the immediate draws, often the reality of complying with the non-residency rules presents practical (and emotional!) challenges. We have seen countless relocating u-turns, so consider practicalities carefully. 

How we can help 

 At Goodbody, we understand that exiting the business is one of the most important personal and professional decisions that any entrepreneur can make. That’s why we believe in the importance of planning – and so, last year, the team at Goodbody and AIB Capital Markets put together a report on business exit planning and succession in Ireland. We wanted to arm business owners with practical information to be aware of and to action where appropriate (Download our report What’s your plan?’  here). 

So, whether your exit is on the horizon or a little further into the future - we're here to help. Our Succession Advisory Team, made up of M&A and tax specialists and wealth planners, offers business owners a coordinated one-stop advisory service across all aspects of a potential business exit, including both personal and corporate financial readiness for business owners.

This is a marketing communication.

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