February 8, 2013
Interviewed by: David Snow
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Exit Planning Starts Early

Philip Bass of EY describes the importance of an alignment of interest between the entrepreneur and the private equity sponsor in planning for an exit.

Philip Bass of EY describes the importance of an alignment of interest between the entrepreneur and the private equity sponsor in planning for an exit.

Privcap: How important is common vision between entrepreneur and private equity firm in planning for a successful exit?

Philip Bass, Ernst & Young: Well, I think you almost got to step back to the beginning before you get to the exit. And the first is, there’s got to be– what private equity does as part of their diligence, they’re looking for that entrepreneur really to make sure that they’re aligned right from the get go, not only around the exit, which is critically important, but around, really, how they’re going to get there, so around the investment thesis and ultimately the value creation plan, the 100 day plan– the first 100 days– but then ultimately, how they’re going to drive value throughout that three to five year holding period.

So it’s really around consensus during that period around their whole investment thesis, and then ultimately the exit. I would say that there surely are contractual provisions that private equity puts in there. But when we talk to private equity, the last thing they want to do is have to pull a provision out of a contract that mandates certain type of behavior.

So they’re really looking for that consensus, that buy-in, that collaboration, right from the beginning. And ultimately, that’s what many times– ultimately, the very successful deals, that’s what really drives that success.

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