Exit Execution Workshop (Philadelphia) Part 7: Your probabilities of success

BY Basil Peters

Exit Execution Workshop (Philadelphia) Part 7: Your probabilities of success

This is the seventh in a series of eight posts on Exits Execution – the Philadelphia Series. In this session, Basil reveals some of the depressing statistics around how few exits actually are successful.

The Exit Execution series follows the Exit Preparation presentation and Exit Strategies – The Waterloo Series available on the exits.partners blog.

The Exit Execution workshop was first presented at the Angel Capital Association Annual Summit in Philadelphia on May 9, 2016.

EXIT Execution – The Philadelphia Series

Very few statistics are kept on the percentage of exit transactions that actually close. Most of the data is anecdotal and difficult to verify. Throughout series on Exit Strategies and Exit Executions, you will see several references to an estimated success rate of a dismal 25%. Some practitioners suggest that it might be as low as 8%. If indeed the success rates are this low, it is no wonder they are kept from view, especially considering how expensive exits can be.

However, success rates vary significantly among firms. Advisors that invest little in the exit process likely have a difficult time explaining the company’s value proposition and may not work to identify and contact all potential buyers. If they don’t see early success they may move on to the next deal. It is highly advisable for companies to interview several investment bankers before choosing one. Companies should press the candidates to discuss their exit success rate.

An experienced M&A advisor can make a significant difference when a “deal killer” pops up. A deal killer is an event (like the latest financials) or an undiscovered document (like a cancelled contract) that reflects negatively and is only discovered late in the deal. An experienced advisor, or the M&A lawyer, can draw upon their history of previous deals, or formulate a response that adds new life to the deal. If the advisor or lawyer can “save” the deal, then the probability of a successful exit increases significantly.