In a pre-exit, the current DGA sells a stake to an investment company. The entrepreneur remains active in the company and together with the new shareholder goes into the future and realizes his/her plans and then years later sells the last package of shares together with the investment company.
It is important to attract an appropriate investment company for this purpose. This is because there are many investment companies operating with different objectives and interests. There may be an interest in only a few specific sectors, a particular phase of the business or a size of the business.
Besides these rational aspects, it is also important that it is a good fit on a personal level, because an intensive collaboration of years will follow.
Financial planning
The investment company, once on board, usually accelerates the plans and will deploy its organization and network in favor of realizing the plans and improving the value of the company. If interesting acquisitions can be made, investment companies are happy to look into them (so-called 'buy & build'). The advantage for the DGA is that with the new shareholder he has the right expertise in house, so the chance of a successful takeover increases significantly.
The owner-manager can organize his personal financial planning with the money he has freed up from the company's risks. With a successful company of sufficient size, this can result in the DGA already being financially independent when selling the first share package.
Peace of mind
Practice has shown that entrepreneurs who have reached this status are still a reliable partner. Where investment companies were extra cautious about this years ago, the attitude has changed dramatically because of the success. Of course, there is also a "healthy" financial reward in store for the DGA when the last stake in the company is sold, and therefore it will certainly also pay off financially to do his/her best and continue the business unabatedly successful.
In fact, many entrepreneurs experience the pre-exit as a very pleasant period, because they have peace of mind about their personal financial planning and also because they have an experienced strategic partner on board, so that the important decisions no longer have to be made alone.
Final exit
Sale usually takes place together with the investment company after a period of between 3 and 7 years on average. The company's plans are important here, but the period also depends on the interest of potential buyers and developments in the sector in which the company operates.
The investment company obviously has a clear interest in ensuring that the proceeds will be optimal and therefore this last step will certainly still be worthwhile for the DGA. In many cases, the proceeds will be substantially higher than the sale of the first package of shares and often also substantially higher than the entrepreneur could have achieved independently.
The moment an investment company comes on board as a shareholder is often also an occasion for managers who are important to the company to acquire a stake. Of course, they must be properly guided in this and do so for the right reasons. You are not doing every manager a favor with this, and a good bonus scheme may also suffice.
