The Importance of Professional Guidance When Exiting a Business

By Generational Equity


Recently the National Center for the Middle Market (NCMM) in conjunction with Fifth Third Bank released a report on a survey they conducted earlier this year. The study is entitled “Owner Transitions in the Middle Market – When Business Gets Personal: A Business Owner’s Perspective on Selling a Middle Market Company.

The report is extremely comprehensive and I would recommend that everyone who is considering an exit from their company download and read it as it is full of key thought leadership for entrepreneurs regarding the exit process.

I thought I would share a few segments of the report with our subscribers; key concepts such as this:

When a business owner sells all or part of the organization into which he or she has poured blood, sweat, and tears, it is no surprise the transition is much more than a business transaction. It is an extremely personal event in the business owner’s life. Indeed, personal considerations impact every aspect of the sale, from key drivers to how owners prepare for the transaction to the concerns and challenges along the way. In many cases, these personal factors bear more weight and affect the sales process to a greater degree than purely business or economic factors do.

As we have said many times in past Insight Posts the final decision to actually exit can be quite emotional and requires lots of input from friends, family members, and trusted advisors. Based on our combined decades of deal making experience, we have found that although “money” is often the initial motivation in an exit plan, in the end, emotional items such as professional legacy, employee well-being, relationships with clients and community often become paramount. This is why our deal teams are so successful: We take the time to truly get to know the client before (and during) the exit journey and in many cases, become more of a family counselor than a financial engineer!

Another key point the NCMM makes in the study is this:


Most middle market business owners who sell do not attempt to address all exit planning issues on their own. They build teams of advisors around them and report the critical importance of having access to the right advice during the process. Ultimately, most sellers with an experienced advisory team express a high degree of satisfaction and success with the transition. They are pleased with the price received and the ease of the process itself, and are often eager to put the funds to work in new ways.

Middle market business owners do not attempt to go it alone when it comes to selling all or part of their businesses. Rather, they work to build the right advisory team who can help them with navigating key concerns and ensuring the objectives for the sale are met.

These owners are likely to include external consultants in their inner circle as they contemplate the various aspects of the sale process. On average, advisory teams typically include four resources representing a mix of high-level business leaders and trusted external consultants. Lawyers and investment bankers are the most popular choices from outside the business. Many owners also involve other external consultants, such as their corporate banker and/or their tax advisor, in the process. 

Again, we have discussed the “value” of professional guidance during the exit journey several times over the years. The long-term success of our firm is driven by our Core Values and how we approach every engagement with the same goal: to help the client find the optimal buyer at the optimal price and optimal deal structure. Unless you have sold a number of companies in the past, most entrepreneurs do not clearly value the “value” of a professional middle market investment bank being at their side. Here is what a few of our clients have told us about the importance of our participation in their journey:

The theme in these videos is very similar: You really only get one opportunity to exit optimally and having an M&A advisory firm with you along the way makes a huge difference.

Finally, one really important issue worth considering:


This key component of the financial planning process is often not explored in enough detail. It’s one thing to consider the lump sum of the cash-out, but it’s another matter when that sum begins to be allocated to a long list of personal goals and objectives. Because many owners have plans to invest a portion of the proceeds in other businesses, this process involves a full risk analysis and an understanding of how investment risk can impact other priorities.

When owners take the time to consider the big picture, they often find they are not as confident as they would like to be in how their finances will ultimately look, both for themselves as well as for the next generation. To be the best possible stewards of their wealth, it is critical for owners to be proactive in optimizing their financial planning and to invest as much (if not more) time in preparing themselves as they do their companies.

Given the importance and complexity of personal preparation for a business transition, excluding wealth advisors is often a particularly costly oversight. Survey’s find that owners who surround themselves with expert advisors in all areas of a transition—including the personal side—are much more confident and overall better prepared for their futures. A sale of a business is probably one of the most important times for great advice. Bringing in trusted personal financial and wealth advisors who are most in tune with the owners’ individual objectives and concerns is key to a transition that works on every level.

Generational is rather unique in the middle market investment banking industry: We provide a full range of services designed to both prepare the company for sale (Generational Consulting Group – GCG) but also an award-winning wealth management team (Generational Wealth Advisors – GWA) to help you protect and grow your newly found liquidity.

We have found that the sooner we get GWA involved with our clients, the smoother the deal typically will go. One major issue: most business owners do not have qualified financial advisors working with them (why would they, they are non-liquid) so GWA can get involved early in our process to help the client determine just how much capital he/she will need post close for the next phase of their lives. This is so very critical and can’t be overstated. If you are considering your exit, you need to find a wealth management firm that can work with your investment bank to ensure a smooth (and safe) transition.

Again, special thanks to NCMM and Fifth Third Bank for conducting this valuable, insightful survey on business owner exits. We too offer educational services like this at our Generational Growth and Exit Executive Conferences. These are of tremendous value, are complimentary, and will provide you with a wealth of information about what you can do to maximize your exit today, tomorrow, or even five years from now. To find one near you, use this link.

The Study’s Research Process:

To better understand how owners’ personal considerations, feelings and perceptions impact every aspect of middle market business transitions, the National Center for the Middle Market, in partnership with Fifth Third Bank, surveyed a group of 300 middle market executives. The sample included 75 owners of privately held middle market businesses, who benefited from the sale of all or part of their companies in the past 24 months. Of these 75 organizations, more than half are family-owned, with more than three-quarters of these family-owned organizations in their second, third, or fourth generation of ownership at the time of the sale.

Carl Doerksen is the Director of Corporate Development at Generational Equity.

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