Exit planning: Five critical factors

Nov. 17, 2014
Exit planning is important for fleet owners, their families and the company

If you own a fleet operation and have a business plan, that plan should include an exit strategy. A well-written exit plan defines exactly how the owner will be paid for their sweat equity at a designated point in time.

Operating without an exit strategy can easily create a lot of stress should the founder become incapacitated. Having a well-defined plan also helps avoid losses that tend to accrue when the sale of a business is delayed.

If you are a fleet owner without an exit strategy, it's time to start the planning process.

Keep in mind these five critical factors that can affect your timeline:

1. The ideal date to exit. How many more years do you plan to spend working on your fleet? Even if you find it difficult to predict this key future milestone, select a potential date anyway, and you can refine it as your company evolves. Revisit your exit strategy periodically (at least annually) and adjust accordingly.

2. Adequate time if selling your business. CEOs who plan to retire soon should be aware that it takes nine months to a year or longer to sell a successful fleet operation. The closer you get to retirement, the more important a definitive date becomes. If you aren't prepared to initiate the exit strategy process in a timely fashion, you could miss out on once-in-a-lifetime opportunities. Be prepared, so you can strike while the iron is hot.

3. The type of exit strategy you prefer. The more elaborate the exit strategy, the longer it will take to finalize the deal. It could take several months or several years. An investment banker experienced in M&A can explain the options and time needed to get different types of deals done.

Common exit strategies include:

  • IPO (initial public offering), where you offer shares of the business for sale to the public.
  • Corporate divestiture, where you either sell to a strategic buyer looking for financial or operational synergy or to a financial buyer, such as a private equity firm, that is planning to grow the business then seek an IPO or another exit strategy at a later date.
  • Passing the business down to family or heirs either entirely or partially, so you can gain liquidity through selling part of your company to a financial buyer.
  • Management buyout, in which the existing management team buys the company.

NOTE: While these are some of the most common exit strategies available to fleet owners, you should speak with an experienced M&A firm to thoroughly understand and evaluate your options.

4. The status of the trucking industry. While the economy plays a significant role in the viability of a business sale, the status of the trucking industry, when you decide to exit, is also critical. Your fleet will be worth more to buyers when trucking is trending up, not down. Since business cycles typically last several years, CEOs who are planning to sell in less than five years should watch trucking industry indicators closely and be prepared to act.

5. The market's appetite for M&A. Supply and demand plays a critical role. When there are fewer companies available for sale and plenty of buyers in the market (as there are today), sellers are in the driver's seat. Fleet owners who plan to sell a company in the next few years should take advantage of the low supply-high demand environment available in today's market. Currently, there’s more than $1.1 trillion waiting to be invested that is sitting on the sidelines.

By way of example, when the housing bubble burst and the economy tanked, investors backed off. Today, investor confidence is back up. As the economy has recovered, private equity and corporate investors, who have been sitting on trillions of dollars, are eager to mobilize and put their investment capital to work.

Whether you've been in business for 5 years or 50, an exit strategy should be included as a key part of your overall business plan.

It will provide you and your family a definitive plan that will ensure you stay on track and maximize the value you have accrued in your fleet operation.

About the Author

John Sloan | Vice Chairman

John Sloan is the Vice Chairman of Allegiance Capital, a middle-market investment bank that works with business owners to help them sell or raise capital. 

John has more than three decades of C-level experience in investment banking and private equity.  He has personally executed transactions with fleet owners and understands the unique needs of the trucking industry. 

During his career, John has raised more than $1 billion in debt and equity.  He is an expert in all aspects of investment banking and has evaluated and negotiated the acquisition of more than 30 companies in: energy, construction, retail, telecom, environmental, logistics and manufacturing, with an aggregate value in excess of $7 billion.

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