If you are considering taking your business through an IPO instead of a merge or acquisition process then you need to learn to identify the short windows of opportunity that open as a prime time to make an IPA. These windows of opportunity will ensure your company will receive a strong valuation on your business and maximize your return on investment. If, however, you are going to pursue an exit strategy through an M&A process then it is more about positioning your business for an acquisition rather than timing.
Pursuing an M&A exit strategy is more about cash than it is about timing. You need to determine if you are on an upward trend or whether you are at the bottom of a trough or just coming off the top. If you are still climbing in revenue and your business is looking better and better each year then a buyer is going to see that as opportunity. If, instead, you are showing three years of growth then the most recent year is a decrease, an investor is going to start to wonder why you what to sell now. What do you know that is making you anxious to sell your business? If your business has been receiving decreasing amounts of cash each year for the last two to three years then it may appear that you are cutting your losses and are looking to escape while you can. Which situation of the three discussed would you be willing to pay the most for a business?
The infamous owner of the Dallas Mavericks, Mark Cuban, owned many businesses throughout his career. The business that made him the most wealthy, however, was Broadcast.com. Mark Cuban along with his colleagues were building the business and experiencing rapid growth all the way up till they found a motivated acquirer, Yahoo, who was looking to improve its technological capacity. Shortly after the sale of the business the company started to head down hill. The point is not to try to stiff arm the party that will make the acquisition, it is to sale the business at the time that you have just about done all that you can to with the business but you are still experiencing growth. Then you sell to another enterprise that can continue growth in a manner that you are not capable of. In this case Yahoo just missed the ball as they took their eye off search engines.
Four Main Roles in an Exit Strategy
There are essentially four main roles in an exit strategy: The investors, the board of directors, the CEO, and the investment bankers.
Each of these key roles need to be performed exceptionally well as each role will play a critical point at some time during the process.