PrintSpeak survival guide: Exit strategy planning

nil recessus carborundorum

success story...

exit strategy planning

This week’s success story is about two owners who took their eye off the ball as retirement approached. Fortunately they sorted out an eleventh-hour exit plan, saving the company’s future and their own personal wealth

The printer is a well-known and respected B1/B2 litho printer based in the south of England, with an annual turnover of around £5 million. The owners were approaching retirement, and company performance had seriously dropped off over the course of the previous two years.

Although previously the company had been very profitable and successful, the owners had taken their eye off the ball and marketing activity, sales levels and general profitability had all declined to approaching-critical levels.

Demoralised meeting

The two owners, concerned at the downhill trend in view of their approaching retirement, asked a leading print business consultant to discuss the problem with them. The meeting was a demoralised affair: “Their body language and general demeanour was completely lacking in confidence,” said the consultant. “They and their business were at a crossroads.”

The first option was to sell immediately at a much-reduced price... the second was to put in two or three years of planned strategic work and to sell for more money

The consultant outlined two options for the owners. The first was to sell immediately at a much-reduced price. This didn’t appeal to the owners, as their investment in the company was to all intents and purposes their pension. The second option was to put in two or three years of planned strategic work to get the company back into a healthy state, and to sell at that point for more money.

Realistic option

The owners recognised this as their only realistic option, and scheduled a meeting with the consultant to draw up a plan to re-establish performance at the original levels, and to increase shareholder value to an acceptable level within two to three years.

A business review was carried out by the consultant, covering every aspect of the business including marketing, production, sales, customer service, IT, finance and purchasing. Following the review, the consultant’s senior management specialists, who had proven experience in the print industry, worked with the owners and with the company at an operational level to improve performance to an agreed target level.

Re-energised company

The overall goal was to sell the company, and there was a lot of satisfaction for the owners and for the consultant when the sale happened within two and a half years, exactly as planned. The business as sold was re-energised and had benefited from the intensive work done by the owners and all staff to improve its performance.

The owners, who were the main shareholders, received fair value from the sale price, and handed over to the new owners an efficient, well-run business which is successful to this day – and the management is happy to stay on and work with the new owners.

what is...

exit strategy planning?

Good exit strategy planning is good housekeeping: seeking to maintain your business in optimum order, says Paul Holohan of Richmond Capital Partners

The print industry has an ageing workforce, and that includes its management and owners/directors. There are many printers who need to be thinking about retirement, but not many who are actively putting in place a good strategy to manage the process to optimum effect

Key elements in an exit strategy begin with carrying out a thorough appraisal of the current business situation, including the current value of the business and all its major fixed assets

It’s also wise to ensure that statutory and tax affairs are in order; that all major documents are filed safely; and that all major developments in the company’s history are recorded

Good exit planning will identify the owners’ personal objectives and timescales for action

Based on the appraisal and the owners’ objectives, exit planning should evaluate the options and identify potential problems and issues

An exit strategy begins when the owner makes a specific agreement with shareholders/a board of directors to pursue a chosen option based on this evaluation

An action plan comes next, with a timetable, and the establishment of credible budgets together with a business plan to create a model of a likely future business

Company accounting policies may need to be steered away from maximising reported profit and towards tax mitigation

who can benefit from...

exit strategy planning?

All well-run businesses should have an exit strategy, but it is particularly important for printers whose owners are approaching retirement

The companies that will benefit most will be those who have time – in other words, where the business has not got to the brink of failure, and where it isn’t therefore too late to reverse the situation

Companies can also benefit by seeking advice at the earliest stage – planning does require time, not just for itself, but for the execution of the plan

Companies who have warring parties in the boardroom may also want to contemplate an exit strategy to restore some unity and limit damage for the company

Another key point to consider an exit strategy is the point at which leases run out and new financing is required; if the finance required is on a wide scale, it can help to tie this up with new ownership if the existing owner is considering an exit

If there is a lack of obvious succession, a planned exit strategy will help to achieve a good sale that delivers benefit for shareholders

Welcome to the PrintSpeak Printers' Survival Guide - helping you to ride out the recession

The pages of the printing trade press have recently read like a Domesday roll-call of print's great and formerly glorious. Who could have predicted the failure of Borcombe SP, Kelvin Print Group, Quebecor, Capital, Printhaus, Butler and Tanner, Celloglas and more? With margins on print lower than they've ever been, the current global economic crisis is magnifying the cracks in every print business model.

But for every bad news story, there are plenty of success stories. Here at PrintSpeak, we decided to pull together a weekly newsletter looking at printers who recently hit a sticky patch - and what pulled them through. We hope it will provide our readers with food for thought. A struggling business is not necessarily a failing one - and knowing who to call is half the battle. In the coming weeks we'll be looking at subjects including factoring, debt collection, credit management, VIAMBOs, cost rate reviewing, credit insurance, financial restructuring and more - building a library of business know-how and giving you the contacts and knowledge to ride out the recession.

Karen Charlesworth
Publisher, PrintSpeak
karen@printspeak.co.uk