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Annemieke Wouterse 'A successful exit is more than a nice return'

Annemieke Wouterse 2021 01 Annemieke Wouterse

When you as NOM invest in promising innovative companies and also become a shareholder, there comes a time when you have to say goodbye to each other. The time is then ripe to make a so-called exit and sell our shareholding. In this blog, Investment Manager Annemieke Wouterse explains how such a process broadly runs and where the spearheads lie for NOM.

Every now and then the media reports on one of our exits. Yet we don't always go public with it. Logically, the buying party likes to keep control and sometimes does not want to say too much about the details of the deal. This means that we have to maneuver cautiously when it comes to publicity. Because we honor agreements, of course, but also because we want the deal to go through at all costs. Because an exit is essential for a regional development company like NOM.

After all, we can reinvest the proceeds from these kinds of deals in new innovative initiatives in the Northern Netherlands. That is also exactly what we do. We invest and become co-shareholders in order to create value together with the company. If we succeed, we sell our shares to another party and use the proceeds to help other startups and scale-ups grow to the next stage, for example.

What are the buyer's plans?

Achieving an exit usually requires careful management of various interests. For NOM, this may be an even greater challenge than for traditional investors. Simply because we want more than just a good return. We find it equally important that we leave behind a company that stands on its own feet and has a bright future in the Northern Netherlands. The plans of the purchasing party must therefore explicitly contribute to this. That is why we want to have clear and transparent information in advance as to whether the buyer's intentions fit in with NOM's objectives.

No fixed deadline

One advantage of NOM is that we are a kind of evergreen. We don't have a fund that closes at any time, after which you have to sell all the holdings from that fund. In other words, we are not tied to a specific deadline. Still, a possible exit after seven or eight years or so must be emphatically on the agenda. How are we all in it? What phase is the company in and what is the future perspective? And what could be a good exit?

But, as mentioned, we are flexible in the duration of a participation. So it can be longer than seven to eight years. There must be a real role for NOM during that period. For example, something may need to be developed further, a factory may need to be built or there may still be a need to deploy a few innovative routes. We will then continue to provide space, knowledge and support to take the company forward. Just until the company is ready for sale.

When is a business ready for sale?

A company is generally considered ready to sell when it meets a set of criteria and has made preparations to successfully sell NOM's equity interest to another party. For example, it must be able to demonstrate that it is profitable or has the potential to become profitable, including a strategy to continue to exploit its growth potential. In addition, all key documents and contracts, such as financial statements, employment contracts, minutes of shareholders' meetings, licenses and patents must be available and easily accessible to potential buyers. And, of course, the company must have a clear exit strategy in mind.

Types of exit strategies

There are different types of exit strategies. An IPO, for example. Or the sale of the equity interest to the entrepreneur or another co-shareholder. An exit strategy that we frequently encounter at NOM is the sale to a strategic party. Usually a party that operates in the same sector as the company and hopes to gain synergy benefits from the sale, because products, services or expertise can reinforce each other. Often they are willing to pay extra for this.

Sometimes strategic parties seek contact themselves. In other cases, NOM or a co-shareholder actively searches for an ideal buyer. We regularly engage an organization that supports us in that search. A specialist who knows the market and the players in that market well and therefore knows where opportunities lie. They can ensure that we get in at the right level and with the right people. At the same time, they can help with making a pitch and preparing an investment memorandum, a kind of sales brochure in which all relevant information about the company is presented to potential buyers.

From teaser to serious offer

To pique curiosity, we often send a teaser first. If there is genuine interest, a Non-Disclosure Agreement (NDA) follows, a non-disclosure agreement agreeing how business-sensitive and confidential information will be handled during the process. If potential buyers then indicate they would like to negotiate, they can make a non-binding offer. Such a non-binding preliminary offer is intended to give the selling party an idea of what the potential buyer has in mind in terms of price and conditions. Then, if everything is in order, they can start the due diligence process. In the end, there is usually one party who says: I want exclusivity, more depth and a serious offer.

Of course, a successful exit is the jewel in our crown. After all, we invested in a company that subsequently experienced a wonderful development. Nevertheless, it gives a double feeling. Parting does a bit of suffering even in an exit. You lose a company with which you have been closely involved for a long time, especially at the end. Now the company will continue without NOM. But pride prevails. Especially if the company can continue to grow and prosper in the Northern Netherlands and we could make a good return on it. Because yes, for us those are the best exits.

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