Recently David Fergusson, Executive Managing Director, M&A-Technology Practice Leader here at Generational wrote a fantastic article on franchising and trends impacting the sale of franchise locations.
Entitled “What the M&A Super Cycle Means for the Future of Franchising”, it provides tremendous insight based on David’s decades of experience in the investment banking arena. I thought I would share a few excerpts from the piece since it captures critical points for considering your eventual exit, especially if you are a franchisee.
M&A has always been cyclical, but the environment right now is beyond anything we’ve seen before. That’s because of the long-anticipated ‘M&A super cycle,’ fueled by the retirement of the baby-boomer generation. So, as baby boomers sell their beloved businesses, we are seeing the beginning of what promises to be trillions of aggregate deal values and liquid wealth transfer from the M&A industry.
We have been talking about the M&A super cycle for years as we have been anticipating a huge migration of baby boomer business owners retiring over the next few years.
Technically the baby boom was 1946-1964. So, the tail end of this group is now entering their 60s and needs to come up with a retirement plan that works, which will include some form of a documented exit plan.
But the key is “planning” which unfortunately far too few baby boomer business owners have done. This is how Fergusson describes the need for preparation:
The biggest problem with companies whose exit strategy is a sale is that they simply aren’t prepared for it. And there’s no way around it: the preparation takes time. The average transaction takes over a year; just getting the documentation together can take two to three months, and without extensive documentation, you won’t get the best deal – or any deal at all. So, you’ll have to start preparing two to three years out from a target sale date.
We often tell business owners that your exit is not an event, it is a journey, one that must be navigated carefully and skillfully to help you obtain an optimal deal for your business (whether it is a franchise or not).
Odds are good that unless you have sold several businesses in your career, you will need the guidance of a skilled M&A advisory firm, one that is experienced and successful in closing deals for years and years (like Generational I might add).
But if you have to go alone, David provides some great step-by-step advice at the end of his piece:
Have a plan.
You should have a strategic growth plan that is written down so that your whole team is familiar with it, and on board with it
Build a culture.
You need strong core values while still remaining flexible and open to change
Assemble a leadership team.
Buyers won’t like a company that relies too heavily on the owner. Invest in a reliable team who steps up after a sale
Figure out what matters most to you, let your team know how you’re measuring it, and reward on it
Recognize momentum when you have it and ride the wave. If you don’t have any, make finding momentum a priority.
This is tremendous guidance from an experienced dealmaker.
If you follow it, you will have a much better chance of success at the end of your exit journey. Of all of these, number three is usually the biggest challenge for many successful entrepreneurs. Most likely you have built a very profitable business over the years based largely on the sweat equity you and your family have put into the operation.
But at some point, it becomes vital to delegate key decisions to your core middle management team so that they begin to develop the ability to run the business under new ownership once you move on. Do not delay on number three!
Buyers avoid risk and one of the riskiest scenarios is a business that relies on the owner for all key decisions. That will not only dampen the valuation of your company, but it may also make it hard to find a buyer at all.
So, we thank David Fergusson for his tremendous insight into franchising M&A. If you would like to read the entire piece you can do so using this link.
To gain even more knowledge on effective exit planning, you should set aside some time and attend a Generational Growth and Exit Strategy Conference.
We hold these throughout North America and by attending you will be much more prepared for an optimal exit than before. To learn more, please contact us and we can discuss your specific situation.
Carl Doerksen is the Director of Corporate Development at Generational Equity.
© 2022 Generational Equity, LLC All Rights Reserved
The information we learn from customers helps us personalize and continually improve your experience. Here are the types of information we gather.
We receive and store any information you enter on our Web site or give us in any other way. We do not sell or rent your personal information to others without your consent. We use the information we collect only for the purposes sending promotional information, enhancing the operation of our site, serving advertisements, for statistical purposes and to administer our systems. We DO NOT use third parties to provide customer service, to serve site content, to serve the advertisements you see on our site, to conduct surveys, to help administer promotional emails, or to administer drawings or contests, but reserve the right to do so in the future without advance notice.
Generational Capital Markets, Inc.’s affiliates are all part of one corporate family, they work with one another and may work together to provide services to you. The sharing of your information among affiliates enables Generational Capital Markets to serve you more efficiently and makes it more convenient for you to do business with Generational Group. Generational Capital Markets is permitted by law to share information with its affiliates. All of our affiliates follow similar privacy policies.
For reasons such as improving personalization of our service, we might receive information about you from other sources and add it to our account information.
Generational Group may license the use of its intellectual property including but not limited to its name, likeness, and logo for the use of affiliated offices. Such affiliated offices may not be owned, controlled, managed, supervised or staffed by employees, officers, or agents of Generational Group. Affiliated offices may be independently owned and operated. For more information about a particular office, please contact Generational Group at its office in Dallas, Texas.
This page may contain other proprietary notices and copyright information, the terms of which must be observed and followed.
Information on this web site may contain technical inaccuracies or typographical errors. Information may be changed or updated without notice. Generational Group may also make improvements and/or changes in the products and/or the programs described in this information at any time without notice.
Generational Group does not want to receive confidential or proprietary information from you through our web site. Please note that any information or material sent to Generational Group will be deemed NOT to be confidential. By sending Generational Group any information or material, you grant Generational Group an unrestricted, irrevocable license to use, reproduce, display, perform, modify, transmit and distribute those materials or information, and you also agree that Generational Group is free to use any ideas, concepts, know-how or techniques that you send us for any purpose.
Our computer system protects personal information using advanced firewall technology.
Information Generational Group publishes on the World Wide Web may contain references or cross references to other products, programs and services that are not announced or available in your country. Such references do not imply that Generational Group intends to announce such products, programs or services in your country. Consult a Generational Group representative for information regarding the products, programs and services which may be available to you.
Generational Group makes no representations whatsoever about any other web site which you may access through this one. When you access a non-Generational Group web site, please understand that it is independent from Generational Group, and that Generational Group has no control over the content on that web site. In addition, a link to a non-Generational Group web site does not mean that Generational Group endorses or accepts any responsibility for the content, or the use, of such web site. It is up to you to take precautions to ensure that whatever you select for your use is free of such items as viruses, worms, Trojan horses and other items of a destructive nature.
IN NO EVENT WILL Generational Group BE LIABLE TO ANY PARTY OR ANY DIRECT, INDIRECT, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES FOR ANY USE OF THIS WEBSITE, OR ON ANY OTHER HYPERLINKED WEBSITE, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS, BUSINESS INTERRUPTION, LOSS OF PROGRAMS OR OTHER DATA ON YOUR INFORMATION HANDLING SYSTEM OR OTHERWISE, EVEN IF WE ARE EXPRESSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Generational Capital Markets, Inc. ("GCM"), member FINRA/SIPC, is wholly owned by Generational Capital, LLC ("GC"). Both GCM and GC are affiliated with Generational Equity, LLC; and all part of the Generational Group of companies. This website is solely for general informational purposes and is not guaranteed by us to be accurate and complete statements of fact and should not be relied on as such. Opinions in this website constitute the current judgment of the author as of the date and its last update. The content of this website does not necessarily reflect the opinions of GCM, and is subject to change without notice, and GCM is not under any obligation to update or keep current any information contained herein. This website does not constitute any personal recommendations and does not take into account the specific investment objectives, financial situation or particular needs of the reader. The information contained in this website should not be construed as an offer, or a solicitation of an offer, to buy or sell any securities or other financial investments. The information presented should not and cannot be viewed as an indicator of future performance. To the extent permitted by law, GCM does not accept any liability arising from the use or retransmission of the information in this website.
Furthermore, all information contained within this website is the property of Generational Group.
Honored to win Investment Banking Firm of the Year 3 years running.
Over 50 awards and counting.
Sign up to receive regular email updates, industry-leading insights and details on complimentary M&A executive conferences in your area from our award-winning team
Success, you have been added to our list.