The Exit-Strategy Playbook: The Definitive Guide to Selling Your Business

By Adam Coffey

From the bestselling author of The Private Equity Playbook comes Adam Coffey's second offering, The Exit-Strategy Playbook.

Explore the universe of potential buyers. Learn how to assemble a team of expert advisors to prepare your business for sale. Walk step by step through a typical investment-banker-led midmarket sale process from start to finish.

Adam Coffey has spent the last twenty years as CEO of three private-equity-backed national service companies. Through his experience executing a buy-and-build strategy, he has bought and sold more than 100 companies ranging in size from $1 million to $1 billion. Selling your business is an art. Learn from an experienced artist how to successfully navigate the sale process.

This book isn't about selling fast—it's about selling smart and achieving maximum value for the time and effort you've put into your company. Pick up The Exit-Strategy Playbook today and get an instant PhD in the art of the business sale.

• Language: English
• Publisher: BookBaby
• Release date: Sep 14, 2021
• ISBN: 9781544523026

Book preview

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Copyright © 2021 Adam Coffey

All rights reserved.

ISBN: 978-1-5445-2302-6

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This book is dedicated to the multitude of people across the globe who made my first effort, The Private Equity Playbook, a bestseller. Without your desire to expand your horizons, The Exit-Strategy Playbook would not have been possible. Your direct outreach and engagement inspired me to keep going, to push harder, and to accelerate my efforts to give back to the business community for the many blessings I have received throughout my career.

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Contents

Introduction

Part One: The Universe of Buyers and Exit Strategies

1. Strategic Buyers

2. Financial Buyers

3. Alternative Buyers

Part One Wrap-Up

Part Two: Prepping Your Business to Sell

4. Financial Reporting

5. Real Estate

6. Aligning Operations

Part Two Wrap-Up

Part Three: Build Your Advisory Team

7. Tax Advisors and Accountants

8. Lawyers

9. Investment Banker/Transaction Advisor

Part Three Wrap-Up

Part Four: The Sales Process

10. Marketing and Process Flow

11. Interacting with Buyers

12. Rollover Investing and Residual Income Streams

13. Choosing a Winner

Part Four Wrap-Up

Conclusion

Acknowledgments

About the Author

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Introduction

It’s about that time. You’re a successful entrepreneur, but you’re wondering if there is a light at the end of the tunnel. You’re becoming more conservative. You’re not as young as you once were. Bad economic news causes stress. You see other businesses getting hammered by COVID-19, and you lament the stories shared by other founders at Rotary, business mixers, or the American Legion Hall: If I had only sold sooner. You’re wondering if you’re going to be in business for the rest of your life.

I’ve seen these feelings many times over in the constellation of companies I’ve bought through the years. These are normal feelings; they’re early indicators that it is time to do something. But what is that something?

That’s what we’re here to figure out.

Sales Process One Hundred Times Over

I refer to myself as a blue-collar CEO. I left home at seventeen years old, right after graduating high school. I enlisted in the United States Army, which taught me about discipline, teamwork, and leadership and set the foundation for the rest of my career.

After military service, I worked as an engineer for a number of years, which made me a meticulous planner. Eventually, I crossed over from engineering into business and worked for ten years at General Electric, where I moved into mid-level management and learned how to run a company.

Private equity recruiters came knocking on my door, and I launched into a twenty-year career, serving as the president of three different companies. The businesses were all in different industries. One was a medical company, Masterplan, that serviced imaging and biomedical equipment in hospitals. Another was a commercial laundry firm, WASH Multi-Family Laundry, that serviced 550,000 washers and dryers located in 70,000 apartment complexes and laundromats across North America. The third business was CoolSys (pronounced as two syllables, cool sis), America’s largest specialty refrigeration and HVAC service company, touching more than 50,000 different customer locations.

All three were national private equity-backed companies that I helped grow by using a tactic known in the industry as buy and build. I start with a platform company that’s owned by a private equity firm, and then I buy several other companies and combine them to build a larger company. In the four years I’ve been at my current company, I’ve purchased eighteen smaller companies and have three more under letter of intent as of today. Over the next four years, I’ll probably buy a grand total of fifty. When I’m finished, the company will sell for somewhere between $2.5 and $3 billion in enterprise value.

This process will continue with the next owner until the company eventually hits the public markets anywhere from five to ten years from now.

As a result of the positions I’ve held, I know how to buy and sell companies and successfully work through the sales process. I’ve become an investor in private equity funds and an advisor to others. I am frequently asked to look at businesses and offer opinions from an operational perspective. In sum total, I have bought, sold, and financed around one hundred companies in twenty years. The individual company values ranged from under $1 million to over $1 billion, with an aggregate total amount of financial activity measured at close to $5 billion.

I’ve dealt with dozens of entrepreneurs who were selling their companies, so I can definitely help you sell yours. I understand how this game is played.

Selling Your Business Is an Art

I get it. You’re an expert in your field. You are an entrepreneur who established a business and then continued to grow it for decades with your personal sweat equity. You’ve built an empire, and you are potentially a multimillionaire, but this is no time for pride. Selling isn’t just a big deal; it’s an art, and it takes years of experience to gain expertise. For many reading this book, this is the first time you have looked to sell. You are going to need help. Good news: I am an artist here to guide you step by step!

In my first book, The Private Equity Playbook, I primarily focused on private equity. What is it? How does it work? How has it grown over time? Who are the players? What do they do, and how do they seek out companies to partner with? How do you pick a good partner? Then finally, how do you plan to grow a business once it is a part of your portfolio?

This book is the companion to that book. You may ultimately decide to sell to a private equity firm, and if that’s the case, you should definitely pick up that book! But that’s not the purpose of this book.

Here, you’re going to learn about all the potential buyers of your established business. You’re going to learn the process of preparing a company for sale. Hopefully you’re starting this process years before you actually want to sell because there is a lot of prep work ahead of you.

But don’t let that work scare you. At the end of the day, this prep work will not only accelerate a transaction when it’s time to exit, but it will also maximize the value that you receive at exit.

A Quick Note on Professional Advisors

This book is not intended to provide financial advice or legal advice, steer you in a particular direction, or answer all your questions. Rather, it will help you if and when you ever decide to sell your company.

Note: You’ll want to always employ the expertise of your team—attorneys, accountants, investment bankers, and more—because the legal, financial, tax, accounting, and other business issues that you will face are very based on facts. The outcome of your sale will be impacted by laws, rules, and regulations—federal, state, and local—the interpretation of which will be dependent on those facts. Therefore, the advice that you need can be provided only by experts who know the details of your life (especially your personal goals), your business, and the proposed transaction. Now is not the time to save on assembling your team of advisors, as we will discuss in Part Three. This book is merely a primer to help open your eyes to some of the many intricacies that you will encounter when seeking maximum value at exit. It will prepare you for the journey ahead and demystify the process so you can navigate it with better confidence and clarity.

Here’s What We’ll Cover

This book assumes you are the owner of an established company with real revenue and earnings. This is not about the world of VC-backed adventures, although there are certainly nuggets of wisdom for those entrepreneurs as well. It is organized in four parts.

Part One: The Universe of Buyers and Exit Strategies. Here, you’ll learn about the types of buyers who may be interested in your company and the pros and cons of each.

Part Two: Prepping Your Business to Sell. In this part, you’ll learn what you should be doing years ahead of your sale, including cleaning up your financial reporting, dealing with any real estate the business owns, and aligning operations.

Part Three: Build Your Advisory Team. Your advisory team is critical to obtaining maximum value from your sale. You’ll learn why you need a tax advisor, accountant, lawyer, and investment banker, and I’ll show you how to find them!

Part Four: The Sales Process. Find out exactly what the typical middle-market sale process looks like—from start to finish.

The reason I’ve meticulously organized each step is that ultimately this book isn’t about selling fast—it’s about selling smart and achieving maximum value.

Are you ready to learn more? Let’s get started.

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Part One

Part One: The Universe of Buyers and Exit Strategies

You have spent years building a business, and you’re now starting to think about an exit strategy.

Meet my brother Mike. Mike is the real-life embodiment of the two characters from my first book, Rose and Josh. Rose was a mid-level Fortune 500 employee who left to run a company backed by private equity. Josh was an entrepreneur who sold a plumbing company to private equity. Like Rose, Mike had a first career in corporate America and rose to the executive ranks of a large insurance corporation. In 2005, Mike and I bought an insurance agency together, and he launched into a second career as an entrepreneur, like Josh. As Mike got older, he faced the age-old question: when is the right time to sell? Mike is an absolute expert at all things insurance. But 2020 was his first time selling a business.

And guess what? There were sharks out there just waiting to buy his business, and they can detect in a matter of minutes who is a sophisticated seller and who is not. Luckily, Mike was able to sell to an excellent large strategic buyer that allowed him to stay on and become a rollover investor (topics we will cover later in great detail). But what about you?

There are many types of buyers and exit strategies out there. You need to find the best fit based on your future goals. Do