Why do we need a succession plan

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Succession planning vs. exit strategies
Issues to consider
Acclaro Growth Partners Kit Lisle, Managing
Director 21 Wirt Street SW, Suite 301 Leesburg,
Virginia 20175 703.669.1500 Phone [phone]
Fax www.acclaropartners.com
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Why do we need a succession plan?

• Anyone raising money from investors should have a
  succession plan.
• Having a succession plan will help you build the
  business in that direction to make it as
  valuable as possible for the successor/investor/ac
  quirer.
• Succession planning is a step of retirement
  planning. How will you diversify your net
  worth?
• Business Partners need to have discussed exit
  strategies.
• Helps develop leadership team and prepares them
  for achievement
• Continuity of leadership helps retain key
  managers. More of a process than an event.

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Options.

• Management Buyout or ESOP.
• Private Minority Investment.
• Initial Public Offering.
• Divestiture.
• Death / go out of business.

4
Stages in the planning process.
Inside management team.
Outside acquirer, investor.

• Determine the best course of action for you and
  your business.
• Conduct preliminary valuation.
• Identify successors. Refine the list.
• Develop a prospectus to market the company, its
  value, and your desired terms of a possible
  transaction.
• Negotiate (all the while maintaining managements
  focus).

• Determine the best course of action for you and
  your business.
• Conduct preliminary valuation.
• Identify potential acquirers, investors,
  successors. Refine the list.
• Develop a prospectus to market the company, its
  value, and your desired terms of a possible
  transaction.
• Survive the due diligence process.
• Negotiate (all the while maintaining managements
  focus).

5
Management Buyout or ESOP.

• Focus on long-term strategic requirements.
  Define your goals and your roles. Describe
  future strategy, culture.
• Driven by, and supported by, top management.
• Consider current as well as future
  competencies.Develop leaders by giving exposure,
  experience, education, and support.
• Assess Management using 360 degree feedback and
  well-defined evaluation criteria.
• Enable managers to take more responsibility for
  their own careers (dialogue, coaching, training,
  education should be available for those who want
  it).

6
IPO

• Diversification of assets (up to about 10 of
  shares during the IPO).
• Access to future capital.
• Glory.
• Requirements and responsibilities growth,
  earnings, reporting, oversight and
  second-guessing.
• Not available to all companies.
• Expensive and time-consuming process.

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Outside investors

• Angel Investors owner takes no money off table,
  retains majority ownership. This may be the
  first step in finding a majority investor.
• Venture capital Owner takes no money off table,
  usually loses majority position, may be replaced
  as CEO, VCs provide expertise and contacts.
• Later stage private equity Owner takes money
  off table, may stay to grow company, management
  is incentivized through equity participation.

8
Outside acquirers

• Opportunistic buyers Least attractive b/c they
  do not see synergistic value just looking for
  financial opportunity.
• Individual buyers A single person flush with
  cash is dangerous, especially if he or she has no
  deal experience.
• Strategic buyers Most attractive. The
  strategic buyer, typically a direct competitor or
  future competitor, is willing to pay a premium.
• Financial buyer Later stage private equity
  groups are sophisticated and can make the process
  easy. If they are buying your company as a
  platform, they may be willing to pay a premium.

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Identify managers

• Selection process for choosing an internal
  successor
• Natural leader and recognized as such.
• Respected by peers.
• Seniority and tenure are nice, but not essential.
• Ability to carry out the goals and ambitions of
  seller.

• Selection process for choosing an outside
  replacement
• Undisputable experience, qualifications.
• Proven ability to carry out the goals and
  ambitions of seller.
• Approved by or interviewed by senior management.

10
Writing the Plan

• What is the Goal? (Business Owners Personal
  Goal and Business Goal.)
• What is your vision of the future?
• Who will be the successor, investor, acquirer?
• When will this occur?
• How long will the transition last?
• What are the opportunities for the employees?

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Executing the Plan

• Communication.
• Consensus.
• Future oriented.
• Timeline.
• Step aside.