Recap: September Membership Meeting

SMACNA Greater Chicago welcomed Warren Jacobsen, president and founder of Horizon Capital Advisors, LLC, to our September 6 membership meeting. Warren delivered a thought-provoking presentation on the topic of exit planning strategies to more than 50 members in attendance. He began by posing the question: If something were to happen to you today, who would own and manage your business tomorrow?

Too often, succession planning is an overlooked or brushed off until “tomorrow.” Warren cited a statistic that, of an estimated 5.5 million family-owned businesses in the industry, 40% of those owners are expected to retire by the year’s end — and less than half have selected a successor. No one wants to talk about their eventual retirement until the time comes, but it takes effort and planning to ensure the smooth (and profitable) transition of any business.

The importance of performing a business valuation during exit planning was discussed during lunch, along with the major value drivers when selling a business (profitable, experienced management, up-to-date IT infrastructure, accurate and audited financial statements and more). Private investors typically like to see a minimum of $2 million EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), which is a general representation of a company’s profitability.

3 Most Common Exit Options

1. Inside Sale
If legacy is important, this is the best route to take. This can include a generational transfer, management buy-in or ESOP.

2. Selling To A Third Party
To get maximum value, selling to a third party is beneficial. Private equity buyers are most likely to keep your existing management, while strategic buyers are most likely to pay the most.

3. Holding On
Warren called this the lifestyle option, which benefits owners with regular dividends and leveraged recapitalization.

If a company transition is on the horizon, the time to start planning your exit strategy is now.