Business Exit Proposal - Insights from a top investment banker (IBGrid)

1. Business Exit Proposal Crafting the Perfect Deal-Closing Document Insights from a Top Investment Banker

2. Table of Contents I. The Perfect Exit Proposal 3 II. What is a Business Exit Proposal 4 III. Core Elements of a Winning Proposal 5 IV. Proving Your Valuation Avoid the "Wishful Thinking" Trap 6 V. Buyer Targeting Strategy 7 VI. Structuring The Deal 8 VII. Pre-Empting Buyer Objectives 9 VIII. The Management Transition Plan 10 IX. Legal & Tax Must-Dos 11 X. The Closing Playbook 12 XI. Why Deals Fail 13 XII. Turn Your Exit Plan Into Action 14

3. The Perfect Exit Proposal How to Close Your Deal with Confidence Why This Matters: 90% of deals collapse due to poorly structured proposals. Yours won’t. PAGE 3

4. What is a Business Exit Proposal? Definition: A strategic document showcasing your business’s value, growth potential, and alignment with buyer goals. Key Goals: Persuade buyers to pay a premium. Minimize due diligence "surprises." Accelerate closing timelines. Tip: Treat it like a pitch deck + legal blueprint combined. PAGE 4

5. Core Elements of a Winning Proposal Executive Summary Valuation Justification 1. 2. Hook buyers in 3 slides (financials, market position, unique value). Blend DCF, comparables, and precedent deals. Buyer-Specific Synergies Clean Financials 3. 4. Tailor to strategic vs. financial acquirers (e.g., cost savings for strategics, IRR for PE). Build Trust – Provide audited statements and adjusted EBITDA. Risk Mitigation Plan 5. Address customer concentration, litigation, or debt. PAGE 5

6. Proving Your Valuation Avoid the "Wishful Thinking" Trap Comparables: Show recent deals (e.g., "Your industry trades at 7–10x EBITDA"). Growth Narrative: Use a 3-year forecast with TAM expansion or margin improvements. Adjustments: Add back owner salaries and one-time costs for a clearer picture. Power Move: Include third-party valuations to build credibility. PAGE 6

7. Buyer Targeting Strategy Who Pays the Most? Strategic Buyers Leverage synergies (e.g., cross-selling, cost cuts). Financial Buyers Highlight scalability and management depth. Pro Tip: Create a "Buyer Hot List" (50+ targets). Use NDAs to share the proposal selectively. Case Study: A food brand sparked a bidding war by pitching 5 strategics and 3 PE firms. PAGE 7

8. Structuring the Deal Terms That Close the Gap: Earnouts: Tie 10–20% of payout to future performance. Rollover Equity: Stay invested for upside (common in PE deals). Cash vs. Stock: Balance tax efficiency and risk. Red Flag: Avoid all-cash demands—flexibility wins deals. PAGE 8

9. Pre-Empting Buyer Objections Fix These Before They Ask: Buyers hesitate when they spot risks. Address these concerns upfront to build confidence and secure a better deal. Customer Concentration: Our top 3 clients renewed for 5+ years." Leadership Dependency: A promoted COO runs day-to- day operations. Margin Erosion: Automation will cut COGS by 15% post-close. Script: Here’s how we’ve de-risked your investment… PAGE 9

10. The Management Transition Plan Keep the engine running A smooth management transition keeps the business strong and reassures buyers. Here’s how to ensure continuity and speed up the deal. Retention Bonuses: Secure key executives for 1–2 years. Owner Role: Define your post-exit involvement (advisor, board member, or full exit). Culture Fit: Show how your team aligns with the buyer’s values. Stats: Deals with clear transition plans close 30% faster. PAGE 10

11. Legal & Tax Must- Dos Avoid Last-Minute Surprises: Legal and tax issues can derail a deal at the last minute. Handle these early to avoid delays and costly mistakes Clean Cap Table: Resolve shareholder disputes upfront. Tax-Optimized Structure: Use stock sales (for cap gains) or asset sales (for buyer needs). Reps & Warranties: Limit liabilities with escrow accounts. Cost of Skipping: 25%+ of deals fail due to tax/legal issues. A well-prepared deal not only closes faster but also ensures you maximize your returns with minimal risk. PAGE 11

12. The Closing Playbook Final Steps to Seal the Deal: Due Diligence Room: Organize financials, contracts, and IP in a secure data room. Negotiation Prep: Pre-draft responses to lowball offers and key deal terms. Timeline Planning: Aim for a 90-day close— LOI in 30 days, due diligence in 60. Legal Readiness: Hire an M&A lawyer to draft the purchase agreement early. Buyer Coordination: Set clear expectations and maintain open communication. Final Review: Double-check all legal, financial, and operational aspects before signing. PAGE 12

13. Why Deals Fail (And How Yours Won’t) Top Pitfalls: Unrealistic Valuation: Overpricing scares buyers away. Poor Documentation: Missing contracts and financials create doubts. Ignoring Buyer Motivations: Focusing only on your goals, not theirs. Your Fix: Align on Price: Use a staggered earnout to bridge valuation gaps. Be Due Diligence Ready: Prepare data rooms with 5+ years of tax returns. Think Like a Buyer: Highlight their ROI, not just your exit goals. PAGE 13

14. Turn Your Exit Plan Into Action Start Today Key Actions to Secure a Profitable Exit Assess Readiness: Audit your business for a smooth exit. Plan Your Proposal: Use Slide 3 as a template to outline your deal. Validate Your Strategy: Work with an investment banker to fine-tune your approach. Final Thought: "The best time to plan your exit was yesterday. The second-best time is now." PAGE 14

15. Need expert advice on your exit? Reach out to IB Team hi@ibgrid.com | www.ibgrid.com