The Exit Strategy Explained

Posted by Eric Crouse on Nov 30, 2020 1:54:00 PM

 

Designed to result in a positive exit experience.

Writing an exit strategy is only effective if it centers around the owner’s goals. From determining how long the owner will stay on during transition to factoring in how key employees will be treated after the exit, plans must be developed long before marketing the company. Much of the planning involves identifying which type of buyer is right for your company. If you could pick out a buyer for your rm today, who would it be and why? This is a vital component to the exit process. There are many types of buyers, but we see these 4 key players in the market today:

  • Strategic Buyer: Another call center / BPO
  • Financial Buyer: Private Equity, Independent Sponsors
  • Search Fund Buyer: A form of Private Equity, very limited in scope 
  • Management Team Buyer: Internal team members

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Exit Planning and Explanation

Each buyer has their own strengths and weaknesses, but they are very different to deal with
in terms of types of exits, negotiations, and due diligence requirements. Matching the correct
buyer type to the opportunity allows the owner to understand how his or her exit goals will be accomplished. For example, Strategic Buyers may offer stock as part of the sales price which allows for potential upside but limits the cash received upon close. Financial Buyers offer more cash but may demand a seller note or earn out for as much as 30% of the purchase price. Seed Capital, or Search Fund Buyers are very interesting to retiring owners who want to leave the business, its name and the management team intact. Management Team Buyouts are wonderful instruments but add a layer of risk to both sides that must be understood before entertaining them.

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Examining the types of exit instruments used, the following are typical in a sale: cash, stock, earn-outs, and buyer notes. Most sales will have a combination of at least two, and as many
as three types of renumeration for the seller. Cash is king, and up front is best. The strongest,
more pro table, and highest growing call centers get more cash at close. However, in unique circumstances (health issues, accelerated retirement, etc), cash can be available in lieu of a loan or earn out. Stock can be a great way to get a second bite at the apple as the acquiring company looks to exit downstream. The type of stock received is important, as some types are more liquid than others. Earn-outs and seller notes come in all shapes and sizes, but when matched up with an owner’s goals, many lead to a very acceptable asset.

One key question regarding the exit, is whether the owner wants to stay on for a period of time or hand over the keys directly at the close? Depending on that answer, the buyer profile would have to be changed accordingly in order to suit the owner’s exit goals. Of course, there are tax implications and strategies that need to be employed with every exit, and from time to time, when real estate is involved, that needs to be factored into the equation as well.

Identifying the right buyer through an exit strategy plan will lead to a far better exit experience and an overall higher price point each and every time -- whether an owner wants to retire, be a part of a larger organization, consolidate due to financial hardship, or simply get out of the business.

 

 

 

 

 

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Topics: Insider

Buyer Valuation Methodology

Posted by Eric Crouse on May 1, 2020 6:44:00 AM

Valuations for call center / BPOs will vary depending on a large set of variables, but typically they come down to these 4 areas. Buyers want to know that the past success is not only repeatable but can be improved upon with gains in efficiencies, reduction in costs, and improvements to revenues.

 

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SBA Loans For Call Centers & BPOs

Posted by Eric Crouse on Apr 1, 2020 12:47:22 PM

**  updated post with SBA changes on 4/2**

As of 4:00pm ET on 4/2, the SBA and participating lenders are planning on going live with the PPP tomorrow, 4/3. However, final guidance to banks has not been sent but has been promised by midnight tonight. Because of the high possibility of fraud, banks may choose to service current customers first, non-customer but known businesses next, and finally unknown businesses last. Therefore, we recommend you apply for the PPP loan with your current bank or financial institution.

 

A sample application for Payroll Protection Program can be found by clicking here  

 

In the recent Coronavirus, Relief, and Economic Security (CARES) Act signed into law is $349B set aside for Small Business loans. Many call center and BPO owners have faced significant loss of business due to a myriad of effects the virus has caused to revenue streams, remote work capability, and loss of brick and mortar facilities to stay at home orders. This post will outline the key points of SBA's loan programs available and gives you resources to learn about and links to apply for loans.

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Topics: News

SBA NEWS COMING SOON

Posted by Eric Crouse on Mar 23, 2020 2:23:52 PM
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Determining Value of a Call Center / BPO

Posted by Eric Crouse on Feb 11, 2020 9:55:45 AM

The Long Explanation of Pricing in Call Center / BPO M&A

Each call center will have it’s own unique DNA, so this formula explanation is not a blanket for all centers but rather a general overview of how price is determined. Buyers are looking for balanced, heal- thy businesses that will grow over the short term (3-5 years), and allow them to position for another exit down the road. There are buyers for underperforming call centers as well, although those formulas are less able to be described in short as they are more situational and either relationship, geography, or client based in nature.

Of all the characteristics and metrics a Buyer will review when determining a purchase price, EBITDA (Earnings before Interest, Taxes, Depreciation & Amortization) is perhaps the most important.

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Topics: News

How to Get The Most Value (Highest Price) For Your Call Center

Posted by Eric Crouse on Jan 8, 2020 12:15:00 PM

All businesses sell. Whether it’s by retirement, generational transfers, or in good times or bad, 100% of business entities will change hands during or shortly after the lifetime of the owner. Those owners who plan and strategize for 

an exit are far more likely to achieve higher value and leave the business in their preferred place than those with no plan.

In this blog series, you will discover what’s in a solid exit plan and how to begin writing it. Also, we will discuss the types of exits, types of buyers, and how maximum value is achieved. The last part of the series will be devoted to a Q&A from your input, so be sure to reply with any questions or comments you may have.

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Topics: News

Tips, Tricks, and Lessons from our 20 Years of Brokering Call Centers

In the Posts you will learn:

  • How Call Centers are Valued
  • Tips for Getting the Highest Price
  • Determining Exit Goals
  • Finding the Right Buyer
  • How to Successfully Negotiate Terms

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