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Getting the Most Value for My BPO – Part 3: The Exit Strategy

If you could pick out a buyer for your firm today, who would it be and why?  This is a vital component of the call center exit process. There are many types of buyers today, but we see these four as important players in the market today:

  • Strategic Buyer: Another call center / BPO
  • Financial Buyer: Private Equity, Family funds, Independent Sponsors
  • Seed Capital Buyer: A form of Private Equity, very limited in scope
  • Management Team Buyer: Internal team members

Each buyer has their own strengths and weaknesses, but they are very different to deal with in terms of types of exits, negotiations, and due diligence requirements. Matching the correct buyer type to the opportunity allows the owner to understand how his or her exit goals will be accomplished. For example, Strategic Buyers may offer stock as part of the sales price which allows for potential upside but limits the cash received upon close.

Financial Buyers offer more cash but may demand a seller note or earn out for as much as 30% of the purchase price. Seed Capital Buyers are very interesting to retiring owners who want to leave the business, its name, and the management team intact. Management Team Buyouts are wonderful instruments but add a layer of risk to both sides that must be understood before entertaining them.

Examining the types of exit instruments used, the following are typical in a sale: cash, stock, earn-outs, and buyer notes. Most sales will have a combination of at least two, and as many as three types of renumeration for the seller. Cash is king, and upfront is best. The stronger, more profitable, and highest growing call centers get more cash at close.

However, in unique circumstances (health issues, accelerated retirement, etc.), cash can be available in lieu of a loan or earn out. Stock can be a great way to get a second bite at the apple as the acquiring company looks to exit down the road. The type of stock received is important, as some types are able to be cashed sooner than a liquidation event may occur in the acquiring company. Earn-outs and seller notes come in all shapes and sizes, but when matched up with an owner’s goals, lead to a very acceptable asset.

One key question regarding the exit, is does the owner want to stay on for a period of time or hand over the keys directly at the close? Depending on that answer, the buyer profile would have to be changed accordingly in order to suit the owner’s exit goals. Of course, there are tax implications and strategies that need to be employed with every exit, and from time to time, when real estate is involved, that needs to be factored into the equation as well.

Whether an owner wants to retire, be a part of a larger organization, consolidate due to financial hardship, or simply get out of the business, identifying the correct buyer through an exit strategy will lead to a far better exit experience and an overall higher price point each and every time.

If you’re thinking about selling your call center, Outsource Consultants can help! Find out how you can simplify the call center transition process and receive top dollar for your business.