In previous years, a pre-exit scenario was often mentioned as the solution for the entrepreneur who was not yet ready to sell or quit (completely) but wanted to take preparatory steps to do so.
The attractiveness for both parties was seen in the lower risk profile, on the one hand, the entrepreneur staying on provided more security for the investor and on the other hand, the (partial) cashing in provided more financial security for the entrepreneur. It was therefore seen as a real win-win situation for both parties.
Pre-exit
A pre-exit is a variation of the full sale of a business. In fact, it is a partial takeover of the company, in which part of the shares are sold and you yourself, as entrepreneur, keep the remainder and you yourself also mostly conduct the entrepreneurship/management. Often you already make agreements about how and when the remaining part will be taken over, but that is not a requirement for this construction. The buyer is often an investment company.
In practice, it turned out that many entrepreneurs were hesitant about a pre-exit scenario. What good would an investment company do as a co-shareholder?", "They don't have the same knowledge of the market" and "Won't I lose my independence completely?" were the common sentiments.
Many entrepreneurs were convinced during the boom times that they could run their business independently on the growth path they were on, without help (or even interference) from third parties in their businesses. They preferred to wait a few more years because the growth of the business only increased the value and they could handle all the (entrepreneurial) challenges themselves, they did not need a co-shareholder for that!
Safeguarding assets
The (economic) developments of the past year have clearly shown many of these entrepreneurs that a pre-exit is not a bad tool at all to prepare their business for sale and the future. The challenging market conditions resulting from the corona crisis meant that many entrepreneurs suddenly also needed to be able to move quickly in the areas of finance, legal, and/or organization, often in (sub-)areas of which not every entrepreneur has specialist knowledge.
An investor's know-how in these areas provided an advantage in many cases; from preparing cash flow forecasts to negotiating the deferral of (rental) obligations, working capital management or reorganizing/firing staff could be carried out faster and more efficiently with a partner who has expertise in these areas.
Often the presence of a (wealthy) financial partner also provided more room in the business' liquidity and sometimes even better financing in a market where banks are even more cautious. Also, "securing" part of the capital turned out to be quite nice in a market where "the trees did not always reach to the sky.
Added value
If the past year has made anything clear is that an entrepreneur - not even the best ones - are able to foresee all (market) conditions of their businesses and often do not have all the necessary knowledge if market conditions suddenly change significantly. Engaging with parties who do have this knowledge and have it at their disposal can then certainly add value, both for the business and the entrepreneur.
