Investors’ Blog – from angel investments to IPOs

How to plan for an exit as an investor

3 min read


'An exit is a long-term process, not an event.'

Successful entrepreneur and business angel, John Yeomans, gave a magnificent presentation to an invite-only audience of companies on 'exits', explaining what is vital to consider in order to increase the chances of reaching a successful exit.


John covered the importance of timing the exit, whilst other angels in the room nodded in agreement and supported his discussion with real examples. According to John, at a time of consolidation in your industry your company should aim to be one of the first two strategic deals, as rarely are there more than four deals per consolidation period. Otherwise, you may miss the boat.

However, don't despair as these things happen in waves, and two or more years later there will be another consolidation period. At this point you may be able to get a better deal, having grown and captured a larger market share in the meantime.


Did you know that Sunil Mittal, one of the most successful telecom entrepreneurs in the world, worth over $6bn, reportedly always had a dossier ready for any potential investors or purchasers, 'just in case'? He never needed it; he became very wealthy indeed without a trade-sale. But this does show how tightly he was running his ship in order to succeed. Having the right information, adequately organised and ready to be presented to the due diligence team, can make the process of an exit far smoother, and indeed quicker.


One thing that all angels in the room seemed to agree on was the importance of planning. In fact, this was highlighted over and over again as a key part of a successful exit. Based on the real life stories being told by all the angels, a good adviser helping you plan at each step of the way can really boost the value of your business at exit. Careful thinking around timing, as well as whom to approach and how, can start a very exciting bidding process that will make you hot property on the acquisition scene. Quoting one of the angels that shall forever remain anonymous, 'the best PR for an acquisition is to have confidential talks with a lot of investment bankers at the same time'.

Different types of exits

John Yeomans is incredibly experienced in providing advice to companies looking for an exit. In fact, John advised some of the other angels in the room back when they were entrepreneurs planning their own exits. John explained that there are two types of trade-sales, each occuring at different times in the company lifecycle, and for two different reasons. The first is usually before the company is even cash-flow positive, and is based on 'hope-value'. The real value of the business at this stage is in its potential. The second type is a performance-based exit that typically applies to cashflow positive companies that have been trading for six to ten years. With performance-based exits, companies are often sold for multiple times their revenues.

Not all offers are equal

Another thing learned from this fascinating evening was that offers are not always what they seem. Two angels described occasions when they received initial offers that were not 'real'. One of the angels got an offer that was so high that the company barely entertained it because there was little chance of it ever materialising. Moreover, the distraction that it would bring to the management team running the business would have been too great. A few years later, an even bigger offer was made, accepted and finalised; by then the company was big enough to justify such an offer. Another angel went through a process whereby a potential acquirer initially offered hundreds of millions of dollars subject to due diligence. The target company had been very well run and the due diligence stage was smoothly prepared by an adviser. The acquirer did not find any problems with the due diligence, which means that the deal was ready to go ahead, right? Wrong. The acquirer never had authority to pay more than half of the amount they had initially offered, and they were counting on reducing the price paid based on issues found during the due diligence process. As a result, the process fell through and the purchase never took place.

The issue of working with strategic investors was also raised. Whilst it might be a great boost for a smaller company, it will seriously impact the potential for an exit, as these investors often have blocking powers, and will block the sale to any of their competitors, reducing the value of your business dramatically.

Finally, don't forget that you will have to still run the business while the process is taking place as it is too easy to be tempted to take your eyes off the ball.

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