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The High Costs of Your Exit Strategy Whether it's a divorce or an M&A transaction, divesting can have lasting effects

By Steph Wagner

This story appears in the October 2015 issue of Entrepreneur. Subscribe »


In my prior life as an investment banker working in M&A, my objectives for any client were strictly transaction-based: Prepare the company for the sale, go to market and close a deal that puts the greatest amount of after-tax dollars in the owner's pocket. I paid little (if any) attention to what happened to the client afterward.

It wasn't until I began working as a financial strategist for a number of people going through divorce that I gained a new perspective. After all, a divorce is essentially an M&A transaction, a divestiture of two entities that once merged. In both cases, a successful transaction is one that maximizes the net proceeds to the individual and preserves his/her net worth long after the court documents are filed.

Too often entrepreneurs are hyperfocused on the value of the sale and fail to adequately consider all financial implications, including whether the payout will truly cover their lifestyle and income needs. The two most common financial oversights entrepreneurs make are underestimating how many of their everyday expenses are being subsidized by their business—medical and life insurance premiums, club memberships, vehicles, travel and entertainment costs, etc.—and overestimating the amount of after-tax investment income that can be generated from the proceeds of the sale.

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