Innovation isn’t just about what you build. It’s about what you build towards.
At some point, you’ll be thinking about how to realise the value you’ve created; whether that’s through a sale, a transition to the next generation, or a move to employee ownership. And the earlier you start planning for that, the more flexibility (and value) you’ll preserve.
TRADE SALE
TRADE SALE
ADVANTAGES
- May result in higher value but less control over future direction of the business
- Immediate value realisation for shareholders
- Wide pool of potential buyers
- Strategic buyers may pay a premium for synergies
- Potential for earn-outs or phased exit – which can maximise pricing metrics
CHALLENGES
- Business must be ‘sale-ready’ – robust systems, contracts, and reporting
- Commercial risk of sharing information with a 3rd party operating in the same market
- Buyers will assess potential cost synergies, which may lead to restructuring and headcount changes post-sale
- May involve loss of brand identity or control
PRIVATE EQUITY SALE
ADVANTAGES
- Opportunity for full or partial cash-out, with potential for further upside on next exit
- Brings external expertise, governance, and strategic input
- PE may support further mergers and acquisitions (M&A) or international growth
- Can enable staged succession and professionalisation of the business
CHALLENGES
- Dilutes control – PE investors will usually require board seats and reporting upgrades
- Heavier focus on performance, cash flow, and growth key performance indicators (KPIs)
- Deal structure and terms must be carefully negotiated to align interests
- Extensive due diligence process with multiple workstreams
- Cultural shift may be significant depending on investor style
EMPLOYEE OWNERSHIP TRUST (EOT )
ADVANTAGES
- Tax advantages (capital gains tax (CGT) exemption for vendors)
- Preserves legacy, culture, and employee engagement
- Employees collectively become owners without needing personal capital
- Handover can be gradual, with founder staying on in advisory capacity
- Often requires the lowest due diligence threshold as buyers already know the business
CHALLENGES
- Requires cultural fit and strong internal communications
- Cash realisation for vendors constrained by current cash, debt capacity and future cash generation of the business
- Management successors receive future rewards as income, not capital – may impact retention of top talent
- Business must generate sufficient profits to fund the EOT transaction
- Limited external scrutiny can reduce strategic challenge
- Not always suited to high-growth or capital- intensive businesses
MANAGEMENT BUYOUT (MBO) – VENDOR/DEBT FUNDED
ADVANTAGES
- Retains business culture and continuity of leadership
- Smoother handover with less operational disruption
- Flexibility in deal structuring, e.g. staged exit or vendor financing
- Opportunity to reward loyal management team with ownership
- May be seen favourably by staff and customers due to continuity but may lack fresh strategic impetus
CHALLENGES
- Heavily dependent on the strength of the management team
- Access to debt finance may be constrained, limiting deal value – these transactions typically deliver the lowest pricing metrics
- Ability to pay exiting shareholders limited by cash and/or debt capacity of the business plus future cash generation
MANAGEMENT BUYOUT – PRIVATE EQUITY BACKED
ADVANTAGES
- Opportunity for future upside for management team
- Opportunity for full or partial cash-out, with potential for further upside on next exit – staged succession possible
- Additional capital and strategic input from PE partner
- Brings external expertise, governance, and strategic input may support more ambitious growth or buy-and-build strategies post-deal
CHALLENGES
- Dilutes control – PE investors will usually require board seats and reporting upgrades
- Requires a proven management team
- Involves significant external scrutiny and negotiation – extensive diligence process
- PE partners require strong governance, reporting upgrades and board input – KPI and management accounts critical
- Capacity to pay a high price impacted by access to debt finance
- Higher leverage can burden cash flow
- Deal structure and terms must be carefully negotiated to align interests
- Cultural shift – new dynamics between management and investor, aggressive growth targets and returns expectations may change business culture over time
FAMILY SUCCESSION
ADVANTAGES
- Keeps ownership and control within the family
- Preserves legacy and long-term values
- Can be phased over time to match readiness of next generation
- Opportunity to plan holistically across business and personal wealth
- Can involve external professionalisation (e.g. appointing non-family CEO) to ensure sustainable growth
CHALLENGES
- Requires early and honest conversations about capability and appetite
- Risk of family conflict if expectations are misaligned
- Tax planning (e.g. for inheritance tax (IHT) and business property relief (BPR)) must be kept under regular review
- May limit growth if business not professionally managed through the transition
From Innovation to Commercial Success
Driving Growth in Manufacturing
PLAN YOUR EXIT BEFORE YOU NEED ONE
Whether you’re aiming for a trade sale, a management buyout, or a transition to an Employee Ownership Trust (EOT), the work starts long before a deal is on the table.
Menzies’ strategic business advisory team helps manufacturing businesses stay ‘sale-ready’, ensuring the business is structured, documented, and operationally sound for a smooth transition whenever the time comes. We work with clients to define realistic exit routes early, so decisions on growth, investment and structuring all support the long-term goal. – Mark Perrin, Strategic Advisory Partner
THREE WAYS BUSINESS OWNERS LOSE VALUE AT EXIT – AND HOW TO AVOID THEM
01
LACK OF TAX PLANNING
What happens:
You lose access to reliefs like Business Asset Disposal Relief, or face unnecessary Capital Gains or Inheritance Tax exposure.
How to avoid it:
Speak to your tax advisors early and well before you are planning to exit – the biggest misstep leaders make here is waiting too long to do so.
You need to be structurally and tax-ready to move when the opportunity comes.
02
NO INCENTIVE PLANNING FOR KEY PEOPLE
What happens:
Senior leaders or technical specialists leave before the exit or expect last-minute rewards that complicate the deal.
How to avoid it:
Put share schemes or bonus structures in place well in advance, tied to long-term business outcomes.
03
LACK OF PREPARATION FOR THE EXIT PROCESS
What happens:
The business underdelivers in due diligence and valuations fall short, leaving money on the table or in the worst case scenario – the buyer walks away.
How to avoid it:
Build quality management information early, prepare robust forecasts, commission vendor due diligence, and design a deal process that creates competitive tension.
Appoint experienced advisors who can walk you through the detail – it’s an investment that pays for itself at the negotiating table.
VALUATION SHOULDN’T BE AN AFTERTHOUGHT
When innovation is the heart of the business, knowing how to value it properly is key. Too often, IP or know-how is undervalued in exit negotiations because it hasn’t been independently assessed.
You need clear, defensible valuations – whether that’s for an external sale, an internal succession, or an employee buyout. We help businesses structure deals that reflect the full value of their innovation and ensure financial efficiency throughout the transaction.
WHAT ARE THE MAIN THINGS TO ASK YOURSELF?
- Are we building towards a clear exit route?
- How do we make sure key people stay engaged through the transition?
- What are likely to be the key drivers for an acquirer?
- When is the right time to sell?
- Is the business ready for sale?
Having a clear understanding of the key drivers of value in a manufacturing business is vital at every stage of a company’s lifecycle, but becomes particularly important when preparing for a potential exit. Factors such as operational efficiency, investment in technology and automation, supply chain resilience, and ongoing product development can all have a significant impact on enterprise value. Strategic decisions around costs, R&D investment, acquisitions, or the disposal of non-core assets should therefore be made with the goal of ensuring the business is optimally positioned to achieve the strongest possible valuation. – Georgina Davis, Forensic & Valuation Director
