Fork in the Road

Fork in the Road

It’s that time. You really shouldn’t put it off any longer. You’ve been telling yourself, your family, your friends, and your peers that you have “another three to five years” before you hang it up for good and retire.

Retire, yeah sure. The word and the concept baffle you. You’re the CEO of the most successful AE firm in the tri-state area, which you founded in your late 20s just over 30 years ago. Nobody gave you a chance back then. You were a freshly minded P.E. with a stamp and a dream to do things your own, better way. And you showed ’em, though. Through multiple business downturns, a full-blown financial crisis, and a global pandemic, you’ve built a thriving $40 million firm. You’ve surrounded yourself with an executive team that is competent and loyal. Your line managers and technical staff have deep expertise in the services that clients value. You’ve fostered a culture that is unafraid to innovate and take risks. And through your own innate people skills, your natural love for engaging in and improving your community, and a belief in the science of marketing, your firm’s brand resonates far and wide—with clients, prospective clients, and potential recruits alike.

And along the way you’ve picked up honorary degrees and multiple industry, professional, and business awards. And even though you’re now a grandfather (way earlier than you ever expected), you still have, in your own words, “a full tank of gas,” and you still love running the firm. You cannot imagine your life not at the helm. So yeah, retirement, not so appealing. In fact, not at all.

But you know that it’s time to step back, or step down, or step aside. Whatever type of step is required, you gotta take it. On the one hand, your family demands are different now. More complex, more pressing. On the other hand, your executive team needs to get a read on your future so they can plan for a successful transition. 

In retrospect, probably your greatest achievement is that you’ve built such a high-performing team so that, unlike most of your peers, you have options. You can feel confident about either transitioning the firm internally or selling externally. This is your fork in the road. Which road to take? 

As you ponder your future, here’s some advice so you don’t waste time looking in the rearview mirror of your Viking 90C five years down the road regretting a poor decision. 

1. It’s a small world: But I wouldn’t want to paint it. You may think you’re familiar with all of the external options available to you. You know, the (a) U.S.-based publicly traded firm whose CEO you attended college with and repeatedly calls to encourage you to sell; the (b) seven private equity firms that keep “liking” even your weakest LinkedIn posts although you told them “thanks, but no thanks” at the end of your meetings with each of them; and the (c) French firm that spent 90 days setting up a meeting “to discuss matters of strategic importance,” brought five executives to that meeting, and then waited another 90 days to follow up with a letter (not an email) saying they wished to move “quickly to a discussion on possibly acquiring your firm at some point in the future.” These. Are. Not. All. Of. Your. Options. Fact is, for a $40 million firm there are about 100+/- viable external options (strategic buyers and financial sponsors) depending on location, services, and markets served. (For a $400 million firm, there are probably 50.) Get into the driver’s seat (just like you’ve done for all of your career) and explore as many of these as you can. On your terms. Get the most complete picture of what’s available to you to transition the firm you’ve worked so hard to build. 
2. Don’t go it alone: Selling to your internal team is its own discrete option—with its own set of values and terms and a whole bunch of psycho-political negotiation (which can be liberating or exhausting). However, your internal team is simultaneously a critical part of any external sale or recapitalization. All things being equal, the stronger and more unified your team is in the eyes of a suitor, the greater the value you’ll receive in any external transition. So, collaborate with them to craft the optimal internal AND external option choices. Recognize that they are your partners in the evaluation of your strategic options. Most NextGen teams begin the exploration of strategic options with a bias toward an internal solution. However, many find that through a thoughtful collaborative examination that an external option is best for the greatest number of majority and minority shareholders. 
3. Your next big project: Whether you ultimately secure an internal or external option, you will have a role to play in its success. It’s unlikely that you will be able to just ride off into the sunset like at the end of Shane. As you explore your options, you should recognize the massive opportunity that you’ve been presented with. You’ve once again pulled off something remarkable—a transition of ownership. Now your highest and best use is contributing as only you can to ensure that this next phase of your firm is wildly successful. While you won’t be doing this as the “boss,” you will be one of the most important actors in the drama. This is your next big project.

One of the most important lessons that I learned from one of my mentors was that “everyone is a seller.” And it’s true. When it comes time for you to consider how to transition (“sell”) your firm, keep in mind that maximizing your external options and collaborating with your next-generation team could ideally set you up for your next big project. 

This year’s M&A Best Practices Award (part of our Excellence in Acquisitive Growth Awards Series) will be presented at the Western States M&A and Business Symposium on June 12 at the beautiful five-star Wynn Las Vegas with over 200 AE industry executives and investors in attendance. If you would like your firm to be considered for the M&A Best Practices Award, we invite you to complete the simple application form here. The application should take no more than 20 to 30 minutes to complete. The Award recipient will be notified in early June.

Contact Mick Morrissey at [email protected] or 508.380.1868.