Contractor Exit Strategy 5 of 6: Sale to Management

Selling the business to management is a very common exit strategy for contractors.

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This sale might be integrated with passing the business down to family or used when there is no family involved in the management of the company.  

Succession: Exit Strategy 5 of 6 - Sale to Management.

This sale may be to one person or to a group of people, but in either scenario, there must be:

  1. A clear leader of the business (post-deal) who has already proven themselves with strategy, key relationships, and the required management competencies to run the business.  
  1. A management team that is aligned with each other and behind this leader.
  1. Strong business financial performance to fund the ownership transition.  
  1. Trust from the current owner that this leader and the management team will continue to effectively run the business because they will essentially be financing the deal.

This type of deal will net the current owner more than a wind-down and if managed correctly, will provide continuity for all major stakeholder groups.

Building and preparing a management team for this type of exit strategy is a very deliberate and rigorous multi-year process.  

It requires a disciplined approach to aligning the 4 critical layers of talent management, including market strategy, organizational structure, and key role responsibilities.

Always building a management team with this type of exit in mind will increase the valuation of all other exit strategies while keeping the wind-down option off the table.


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