Investment and Exit Strategy
The best time to consider an exit strategy is when you are developing your business. Our multi-disciplinary team develop your investment and exit strategy, prepare the necessary commercial and legal documentation and support you throughout the investor engagement process.
Optimal enterprise value (the net worth of your business) is best achieved when you commence franchising with the exit strategy in mind. What your network is worth when you’re ready to sell rests significantly on what you do to maximise its value when you’re setting it up. An investment and exit strategy aims to create a liquidity event via the partial or full acquisition of your business. There is always interplay between risk and return so your investment and exit strategy needs to articulate how you will mitigate the investment risk while reinforcing the likelihood of attractive returns. Balancing risk and protecting enterprise value are the core objectives whether you are a franchised business, corporate or distribution network. In simple terms enterprise value is defined by three key elements.
Brand equity refers to the visual identity, customer/client value proposition and the product and service experience. Sales refer to the business’ ability to generate cash flow. Liquidity for some investors is as important as a high return – Amazon’s business model is a case in point. Profitability refers to the business’ operating ratios and net margins, benchmarked to similar industry players. We leverage these throughout the development of an investment and exit strategy and build the business case that justifies your desired return. We begin the process by determining the investor profile and defining the value proposition relative to the decision criteria of potential investors. This is critical as it sets the direction of the investment and exit strategy.
We then examine the financial returns establishing the investment requirement and creating a valuation of your business. We develop a financial model that determines the likelihood of return, an understanding of the revenue streams and the risks. In the case of an investment strategy we need to explain how funds will be used, the strategic objective, the milestones you wish to achieve and the capital drawdowns. This approach demonstrates that you are a credible and strategically focused organisation Taking professional advice and investing in the preparation of all the requisite documentation is imperative to communicating your value proposition and strengthening your investment and exit strategy.
You also need to ensure you have well-documented systems and processes with effective operational infrastructure, training, technology and support resources. Your Franchise Agreements and Disclosure Documents need to be compliant with the current Franchising Code of Conduct. Additionally all leases, licences, deeds and Trademarks need to be properly executed and up to date in order to meet the rigors of the due diligence process. Our team is widely experienced in devising the strategies and the documentation to prepare for both investment and exit with a short or long term view. Our commercial, legal and brokerage teams also assist with negotiation and facilitation of all aspects of the transaction.