Page 9 - TACC 2023 Program

SPONSORED CONTENT

20TH ANNUAL ACG CAPITAL CONNECTION

Considerations around potential exit strategies for founder-

owned businesses in 2024 and beyond

aby boomers an investor. With full liquidity, the complete change growth or when interest rates are low.
account for in ownership control can be represented in a cash/
Bapproximately stock deal or an asset purchase. In partial business • In an ESOP, or employee stock ownership
21% of the U.S. transactions, the company’s owner remains involved plan, part or all of the company ownership
population — and in the operations to some extent. The owner might goes to its employees. This route can provide
70% of baby boomer be able create a liquidity event and monetize their tax advantages for the business owner while
business owners investment partially while benefi tting from potential allowing employees to be invested in the
will be retiring in the future growth, along with the investor. company. The potential downsides of ESOPs
coming years. Baby include that an ESOP cannot pay above fair
boomers own millions Selling to a Strategic vs. Financial Buyer market value; they have complex operating
of businesses, many When considering the type of outside buyer who rules; and they attract regulatory scrutiny, which
of which are middle might be best for an exit strategy, two options are can lead to risk of penalties.
KAREL LOUMAN market companies. strategic buyers and fi nancial buyers. Strategic
Managing Director, What will happen buyers are interested in the long-term benefi ts of With the expectation that middle market M&A
activity will continue to rise in 2024 and beyond,
Head of Financial when a large wave the company fi tting into their own business plan. it’s important for business owners to work with
Sponsors, Texas of boomers retire, They are more likely to aim for a 100% stake in the a professional advisor who has deep industry
Capital and many of those company. Financial buyers, often private equity fi rms expertise. Middle market companies often need a
businesses suddenly or family o ces, are more interested in the potential unique approach in fi nding the right exit strategy,
fl ood the market? And fi nancial return achievable by buying the company and an advisor can carry out a specialized plan to
do these business owners have an exit strategy in or a controlling stake. They might be buying into the help business owners achieve their goals.
place? company’s expected future earnings and often want
the current team to continue to run operations. Trading in securities and fi nancial instruments,
Many of them don’t, which could mean they strategic advisory and other investment banking
won’t be able to extract the value they want in an Other Alternatives activities are performed by TCBI Securities, Inc.,
oversaturated M&A climate in an unpredictable • In a management buyout (MBO), a company’s doing business as Texas Capital Securities. TCBI
economy. That’s why it’s important for owners current management team acquires the Securities, Inc. is a member of FINRA and SIPC
of middle market companies to consider these business by buying out the founding owner, and has registered with the SEC and other state
potential exit strategies in order to maintain the usually with the backing of a third-party capital securities regulators as a broker dealer. TCBI
value and legacy of their business. Here are some provider, and continues to run operations. Securities, Inc. is a subsidiary of Texas Capital
potential exit strategies to consider: Bancshares, Inc., the parent company of Texas
• Leveraged recapitalizations convert an Capital Bank. Securities and other investment
Full vs. Partial Liquidity owner’s equity to debt and use the proceeds products o ered by TCBI Securities are not
Full liquidation of a business entails a 100% to buy back shares or a dividend. This strategy FDIC insured, may lose value and are not bank
complete sale of the company ownership, sold to can be used in preparation for company guaranteed.

Why I’m feeling considerable tailwinds, while many currently

feel headwinds.

ometimes I tailwinds out there right now for Interim in everyone for years, and simultaneously watching
can’t contain particular and there is no sign of slowdown for the Interim talent base continue to explode into
Smy emotions. the next 3-5 years. Things are just getting heated the millions as people really enjoy this alternative
Especially when up for Interim, especially in the U.S. I am actually means of employment, and 2) they are starting to
it comes to being super genuine in my mission to educate fi gure out that not all positions they desire to fi ll
talking about all everyone and anyone about one big fact:the have to be performed on a full-time basis, which
things Interim. traditional workforce is rapidly changing.Being has typically always been the case. Smart and
My excitement fl ipped on its head a bit actually. And that alone is strategic companies have fi gured out that some
in conversation the reason for great excitement! specifi c duties and responsibilities of positions
generally oozes Disruption is good. The days of a company can be performed over a few months at a time and
industry optimism, exclusively managing its workforce through there’s no real need to fi ll the seat permanently
MARK VINER which can cause internal hiring are over. Please, someone, tell year-round. Ah, cost savings in comparison to
President Interim people to look me, how exactly are they going to do that (i.e., having the full-time FTE (that you can’t readily fi nd
at me kind of
Solutions, ZRG funny sometimes hire and access talent up and down the line the quickly anyway).
Partners way they always have), particularly in the face
- especially during of the lowest recorded unemployment level that And...what’s permanent now anyway? In the same
times like this anybody reading this has ever seen and alsoan PwC report which projects the massive worker
when everyone is incredible global worker shortage that is predicted shortage, they also predict that24% of all U.S.
questioning what’s going on with the economy by PwC to reach 85 million people over the next employees will change jobs in 2024. Read that
and the labor markets. Or, more likely, I’m looked several years?Read that again...that is the size of again....24%!!! Again...same question as above...
at with skepticism. It’s a crappy labor market. Germany! how are companies going to deal with that sort
Everything in the economy is unsettled right now. of continuing workforce change thrust upon them
Companies are laying o . They don’t appear to be Very often, to manage their workforces, with so much, what, weekly, employee turnover?
hiring at the pace they’ve hired in the past. “Mark, companies are now accessing dedicated and
why are you so excited? You’re not being genuine experienced Interim talent to plug in and help It’s go time for Interim. The core Interim business
and truthful. There are considerable headwinds get things done, especially with traditional perm model was purposely constructed to counterattack
out there right now”. hiring being so challenging right now. Companies these challenging market forces. Seen this coming
have realized 1) something has to give in terms of for a long time. Only took a pandemic to kick it
No, there’s not. Conversely, there are considerable the real labor shortage that will continue to a ect into high gear.