Insights from Calder Capital’s Certified Exit Planning Advisor

Hannelore: Can you briefly explain what a CEPA is and why it is important in the M&A process?

Jared: It's a very valuable designation and a great partner to have, as they can operate as a quarterback when you're considering any type of business transition. A CEPA is able to bring together your financial needs, your personal financial needs, and your business needs, look at them holistically, and develop a game plan for what you need to get out of a business transaction in the future. Whether you're looking to sell or looking to build value in your business so you can strengthen your personal finances, strengthen your retirement, that's what a good CEPA can do. We are both an operational and a strategic partner.

Hannelore: What specific training and knowledge does a CEPA acquire during their certification process?

Jared: The CEPA certification process is a fairly intensive classroom structure up front where you had several hours a day listening to various expert speakers and their subject matter expertise in areas of financial planning, wealth management, family advising, M&A advisors, attorneys working in family law, ESOP specialists, all sorts of experts in their fields that provide a ton of knowledge about what they do and how that feeds into a potential exit from one's business.

After that process, you take a lengthy exam to officially get your credential, and you are also connected with a number of resources.

Many of the resources we're speaking to during the classroom sessions will reach out and connect with you directly via LinkedIn or some other personal way so you can leverage them. 

Then, there is a continuing education requirement to maintain your CEPA. Every three years, CEPA’s take 40 hours of continuing education to maintain their credential. So, they are keeping you honest in the process and keeping you up-to-date on any changes and advances that might help refine the process.

Hannelore: How can utilizing a CEPA be beneficial for a business owner considering selling their business?

Jared: So, as a CEPA, we have a business owner who’s considering selling their business. It's really important up front to ask some really key high-level questions about what they're trying to get out of a potential business sale.

• Are they simply looking to exit and maybe retire?
• Are they looking to exit and transition into something else? 
• Are they just more curious about what the value of their business might be?

There are many more questions that we ask up front before going into what they call the triggering event, which is a deeper analysis of your options and the best option for meeting your goals.

That is the biggest value up front: just asking those key questions to make sure that you are thinking about it. If you're planning on retiring, what are you going to do while you're retired? It's a big transition to go from putting the blood, sweat, and tears into your own business that you built and having to figure out how to fill your days. An owner’s business is often what gives them meaning, and you don’t want to lose that sense even when you’re not in the day-to-day of your business anymore.

From that point forward, again, depending on which direction you're looking at, is it more about building value within your business to potentially increase the sale value? Well, then we're talking about really being a value advisor. What levers do we need to pull or improve to grow that business value?

If you're looking to make an exit and sell, there's probably more of that quarterback role coming into play, where it's making sure that you have the right advisors surrounding you before you start working with an M&A Advisor to represent you in a transaction.

It's not just the CEPA. It’s critical to have the right financial advisor, the right attorney, and any other experts in their field who might have relevant expertise within your type of business. The CEPA is there to coordinate with all of those advisors and keep things moving forward as you pursue your exit plan. 

Hannelore: How does having a CEPA as a business advisor benefit business owners preparing for an exit?

Jared: Having a CEPA provides many benefits. I’ve talked a bit about the need to have that quarterback in place to manage all the different parts and pieces before making a transition in your business. Even more importantly, a good CEPA is going to bring an unbiased perspective to the table. CEPAs have the experience and the network of experts to effectively and efficiently look at a business and target areas of improvement that tie directly to the value of one’s business. When a business owner shifts from preparation with a CEPA, to going to market with an M&A Advisor, you want that M&A Advisor to be able to represent your business and its maximized value to high-value prospects. 

This is a nearly impossible task for a business owner to do when they are fully immersed in it, which isn’t a shot against business owners. This happens because you are so fully invested, and in most cases, this personal and emotional investment has been in place for years. It’s difficult for an owner to step back and evaluate their business as a buyer or lender will. Calder’s exit planning services essentially do that for prospective sellers. We examine the business like a buyer would and help you to shore up weaknesses before facing real buyers on the market. 

Any kind of business transition is stressful, whether it involves building up value or selling to a new owner. CEPAs are trained to manage this stress and keep the path forward as clear as possible.

Hannelore: How do you tailor your strategies to meet the unique needs of each business owner?

Jared: I think that's a great question in terms of how to tailor strategies. I will sound redundant, but it's going to go back to that quarterback role again: understanding the individual, their individual situation, their family, their business, and the business ownership structure that's in place.

The ability to build a tailored strategy comes down to asking questions on the more relational side of things. This part of the process is not transactional; it’s on the softer side and in getting to, again, really understand the person. There's going to be a lot of poking and prodding questions, and the questions might seem somewhat endless. Still, there's a good reason that we're doing that: we want to make sure that we totally understand the big picture of your life, your needs, and what you're looking for in the future, not just today.

Hannelore: Can you provide examples of how CEPAs help manage risks during the M&A process?

Jared: There are a couple of different ways to manage risks, depending on the type of event. Suppose you're looking at really building value within your business, and you're looking at a situation where your business is over-leveraged in one area. In that case, we might be looking at some type of recapitalization exercise. That's something a CEPA should have the ability to do: study the financial picture and see where there's an opportunity to make improvements that would make your business more profitable and valuable. Or your leverage issue is people-related, not financial. A CEPA should be able to see your organizational structure, connect this to the performance of the business, and make recommendations on how to structure your team better to maximize efficiency. These are hugely important factors to a potential buyer down the road.

If the focus is on preparing to go to market to sell versus value building, it comes back to being surrounded by the right team. So if you're going into a sale where it's very important to have all of your I's dotted and your T's crossed, are you getting the correct advice, the right advice in terms of legal? Is your business structure set up properly? Is your tax structure set up properly? Are you maximizing all of those tax benefits that are available to you? Is there anything within your current structure that opens you up to risk with a potential buyer where the due diligence period could lead to a retrade? And on the personal side, do you have a plan for what could potentially be a major financial windfall post-sale?

Those are all the places where the CEPA will coordinate and either advise directly or connect you with the right expert to mitigate risk.

Hannelore: Could you share a success story where your expertise as a CEPA made a significant difference in an M&A transaction or in preparing a business for exit?

Jared: One instance would be where there was a business that attempted to go to market to sell. It was on the market for almost two years and had a ton of interest. Hundreds of people reached out with some degree of interest, and they were able to narrow it down to one potential buyer. It was a profitable business; they knew what they were doing, but they needed to be able to represent their business to potential buyers properly. The business was making money, but how exactly they were doing it and where it could go in the future needed to be clarified. The buyers were not able to get comfortable enough to move forward with a transaction. The business needed some help to shift its perspective and thinking when it was doing its day-to-day business operations with the goal of selling. How would a potential buyer look at them? And that's where the CEPA training has really come in handy when talking about business attractiveness and personal readiness. We were able to quickly identify some trouble spots on the financial reporting side and get them connected with the right accounting services partner. Freeing up that time meant the primary owner spent less time managing finances and was able to focus on optimizing roles and responsibilities with the broader team. Now, this has freed up the owner to spend more time leading the business from a strategic angle, which will help immensely when going back to market.