Middle Market M & A, 2nd Edition

CHAPTER 4Transition, Succession, and Exit Planning

Owners' motives, goals, and ambitions matter. It is not possible to have a holistic discussion about middle market M&A without thinking about the owners of these companies. After all, except for private equity or institutionally owned middle market businesses (which count is minor compared to the total population), an individual owner is eventually going to pass their holdings to someone or something; whether the transition is planned or unplanned, it is just a matter of time.

While in classic corporate finance education, publicly traded companies are supposedly mandated to maximize shareholder value above all else, privately held companies usually have a mix of shareholder^a objectives. The ideal scenario is to design a transition or exit that achieves all of those ambitions. That cannot happen if plans are made in haste; it requires thought, proactive planning, and positioning for the company and for its shareholders. While we are approaching this from the vantage point of transition, succession, and exit planning, the concepts and ideas presented are relevant for most companies wanting to be prepared for market opportunities, raising capital, pursuing an acquisition, improving their long‐term value, or becoming more resilient against internal and external shocks. We have somewhat conflated and interchanged the terms transition, succession,^b and exit planning, as we think broadly about the concepts of creating shareholder ...