Knowledge base item

Time for the pre-exit

Good preparation is half the work

It is a good time to think about the future of the company. Would you like to safeguard part of the passion you have built up and still do business for a few more years (with a partner)? Then the pre-exit might be a good option. A pre-exit involves selling part of the shares now and transferring the rest in three to five years. You can then accelerate your efforts to achieve a better operating result(EBITDA) and/or result before tax (EBIT) for a number of years before selling the company to a strategist for an even better sales multiple.

A gradual process adds value

Often, the more gradual transition approach is an easier path to follow. Both parties have an interest in a good cooperation. The deal is not negotiated at the cutting edge. One wants to build together for a number of years, a win-win attitude is the basis. The team of Florijnz appeals more to that: parties are interested in a sustainable transaction and less an "all or nothing" attitude.

The advantage of investment companies

The major advantage is that investment companies can provide added value, which increases the EBITDA result more than without the presence. Multiple studies show that a company grows faster in profitability with the presence ofPrivate Equity than without. Ultimately, EBITDA is still the most important driver of company value.

Furthermore, the risk profile decreases and the saleability is promoted when a Private Equity company is part of the company. Potential buyers are generally more comfortable with the presence of the investor than without the presence of additional investors. Private Equity has a reputation to defend, so they generally ensure that the "house is in order". Including the hygiene factors that entrepreneurs often see as a lesser priority.

Replacement of the management team

Finally, an investor looks professionally at possible replacement or addition of (extra) management. Entrepreneurs are generally more reluctant to allow others to participate at an equal level. After all, there can only be one captain on the ship. Only sometimes does the captain have to train his replacement before he decides to leave the ship completely.

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Would you like to discuss the possibilities of a pre-exit within your organisation?

We would like to get in touch with you to discuss how we can best be of service to you.

Hans MinnaarFounder and director

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