To achieve their desired outcomes, business owners often focus their attention on exit planning from the beginning of the investment, in order to prepare adequately for trade and financial sales, make effective use of the buy back option, market their businesses more widely for sale, use intermediaries and get the support of management Significant value is lost due to an absence of or inadequate exit planning. Roughly 30% of businesses will be transferred to family member in some manner, 18% intend to sell to its employees, and many will simply be closed. Up to one-third of businesses that are closed were successful at their termination. The three sources of enterprise value in a company are firstly the value of its tangible assets, and secondly the value of its
intellectual capital (intangible assets), which consist of
human capital,
relational capital, and
structural capital (including is subcomponents
organizational capital, innovation capital and process capital. Most of a
middle-market company's and
lower middle market company's value is derived from its relational capital, specifically, its customer relationships.
SMEs, also referred to as middle market companies, create innovation capital (part of structural capital). Most small-to-medium-sized businesses use a
boutique investment bank to market their company in a mergers and acquisitions transaction to potential buyers. Some boutique investment banks also offer exit planning preparation, while certain consulting firms offer one or more of the services needed to conduct exit planning, such as
human resources, in connection with succession planning.
Private equity groups are common acquirers of
middle market businesses, whether as "platform" companies or add-on or tack-on acquisitions. In addition to business aspects, personal considerations need to be taken into consideration, including considerations about estate taxes, capital gains taxes, or other taxes. == References ==