Exit strategy key to export success – Johnson

COMPANIES that trade internationally can reap the rewards of a sale if they go about the exit process the right way and avoid potentail pitfalls, according to leading lawyer Robin Johnson.

Mr Johnson, of Eversheds, said that getting the right advice is crucial when an organisation is considering its future options, including a sale.

In the fourth of a series of articles analysing both the opportunities and challenges facing businesses who want to trade internationally, Mr Johnson has outlined the sales process.

Last month, Mr Johnson told TheBusinessDesk.com that companies that export should evolve their business strategies in order to achieve success.

Continuing his case study on a fictional Yorkshire company’s export journey, which last saw the organisation enter into a joint venture with its Scandinavian distributor, Mr Johnson today said that discussing options with key customers is vital.

Mr Johnson takes up the story: “The Scandinavian arrangement turned out to be a great success. The Yorkshire company, through the Scandinavian entity, obtained some long term strategic orders from significant global Scandinavian based engineering companies. 

“The guy who ran the distribution for Scandinavia really now wanted out because of retirement. A put option had been put in place but in reality it was crunch time for the Yorkshire company to make a big decision.

“Did it buy the Scandinavian distributor out or did it look at other alternatives?”

The company realised the best option was to discuss its future with its key Scandinavian based customers,  the results of which revealed it was proving problematic to run the Scandinavian business from Yorkshire.

It was still being run by the original Yorkshire management, they hadn’t really built up their team other than sales and maintenance in Scandinavia having relied on a distributor for many years,” Mr Johnson said. 

“However, despite positive customer feedback, when the Yorkshire company raised the question of what to do next, where the business was going and so on, the customers changed gear.

“They really wanted to have a strategic relationship with a multinational. The suppliers suggested therefore that the Yorkshire company sold up but sold to one of their other trusted suppliers, not to a private equity firm, not to a third party the supplier didn’t know but to one basically where the suppliers were dictating who to sell to.”

At this juncture, Mr Johnson says, it was crucial to take on board professional advice and the company did just that through a corporate finance expert within an accountancy firm. 

The advice was to pursue a sale but to do so confidentially, not on the open market.

“When the entrepreneur went back to the Scandinavian customer and said that he was ready to sell, you could see the relief on their faces,” explains Mr Johnson.

“The customer put him in contact with their preferred buyer but at the same time they agreed to ensure that the buyer understood that it needed to pay for the goodwill and hard work that had been put in over the years. 

“Yet again the entrepreneur’s advisers stepped in. some information was put together which was given to the buyer. They made sure there was a strong confidentiality obligation in place before any information went out.” 

Following negotiations between a potential international buyer and the Yorkshire company, an offer was put on the table that was “far more than the Yorkshire man had ever hoped”. 

“In effect the Yorkshire company was going to be subsumed into a much larger international business.

“The customer made it very clear to the Yorkshire company this was very important that this happened as soon as possible. 

“In effect it was taken out of the Yorkshire company’s hands but three or four months later after what the Yorkshire man thought was a ridiculously detailed due diligence he walked away with a significant amount of money.” 

Following the deal, the entrepreneur decided to become a business mentor, having remembered the advice he had been given at the start of his journey during a visit to a UKTI international trade event.

“Since he became a mentor a number of people have benefitted from the Yorkshire man’s experience but inevitably you still need to learn yourselves about both the ups and downs and learn the mistakes yourselves.” 

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