Start planning early to prepare for an exit: Insights from KPMG’s Dr. Ashkan Kalantary

3 min read
15 Apr 2021

nderstanding the available exit options a startup has beyond the trendy and popular initial public offering (IPO) can help shape its journey. According to Dr. Ashkan Kalantary, mergers and acquisitions (M&A) partner and head of Venture Services at KPMG, the majority of startup exits are trade sales – when one company or strategic partner invests in the startup, acquiring it in part or entirely. He notes that it can be difficult for founders to decide on the right strategy for their business, especially in the early days, but that KPMG Venture Services works with startups to provide insight and help them make the right decisions to get to an exit.

Dr. Ashkan Kalantary

As the head of Venture Services, Ashkan works with a network of two hundred people across Germany, helping entrepreneurs launch, scale and sell their businesses. The department also provides wider support for the German and European ecosystems, which includes cooperation among corporations, startups, investors and the public sector. As M&A partner, Ashkan advises founders on their capital raises and exits. 

He previously founded a digital-marketing and event agency, was the chair of accounting and valuation at the Technical University of Berlin – where he also pursued his PhD – and was the director of NextLevel at PwC Germany, an initiative to support startups and venture capital investors in the German ecosystem.

Have an endgame from the start

KPMG Venture Services provides startup services across Europe, supporting young companies from founding through to exit. It provides expert advice on M&A, fundraising and IPO. Ashkan says that whether you want to buy or sell a startup or scaleup, early planning is prudent. The earlier you can avoid potential legal, tax, financial or even process-related risks, the faster and more effectively you can start with the first concrete steps of a successful transaction. 

Ashkan suggests that founders have an endgame from the start. That is, they should know right from the start how they’d like to proceed with their business in future. Having this exit story from the outset will help determine a company’s path. 

For example, a founder who aims for their company to be an international market leader will require different growth and financing paths than one looking to gain traction in one market and then maintain it. One path might need a lot of cash up front to grow as quickly as possible, while the other might require strategic partner investors who can provide both cash and industry connections. “You have to know which types of investors to bring on for fundraising rounds depending on your strategy,” says Ashkan. 

An equity story is how you want to tackle the market. Your equity story shapes your exit story.

Prepare a business plan and equity story

A business plan and equity story can help a founder explain their eventual goal to potential investors. A clear business plan should include financial plans, liquidity management and controlling and reporting documents. These outline how the company has performed and where it plans to go in the next three to five years, and the business plan should highlight the endgame. 

An equity story is how founders explain their vision to potential investors, so they understand the returns on their investment. “An equity story is how you want to tackle the market,” says Ashkan. “Your equity story shapes your exit story.”

It’s particularly important for founders to keep their exit story in mind when looking for investors in Series B and C rounds, as these investors can help a company achieve the exit. Ashkan notes that within Germany there has been a large number of late-stage investment rounds financed by capital outside of Europe, so advises Germany-based entrepreneurs to be prepared to look for international investors. He believes that if German investors were to stay more involved in later funding rounds, it would lead to a more self-sustaining startup ecosystem. 

KPMG provides services to help founders develop a successful exit strategy. Its aim is to create as much value for the company as possible by properly preparing all due diligence and accounting documents. KPMG also creates marketing documentation for companies, creates long and short lists of investors or buyers to approach, collects nonbinding deals and handles due diligence. 

Ashkan suggests founders contact an M&A advisor early on in the exit process instead of handling it alone. “It’s always difficult to sell your own business, and you can’t negotiate when you’re in the middle of the process,” he says.

Dr. Ashkan Kalantary’s top tips

  • Manage the expectations of your stakeholders and shareholders. When preparing for an exit, stakeholders need to be aligned. Identify their interests and make sure they’re all on the same page.

  • Generate liquidity. Exiting when your company has liquidity issues can decrease the initial listing of your company’s stock price. 

  • Improve performance. Creating buzz around your company by having positive press and amazing talent can help. When your trade sales go up, the value of your company does too.

  • Provide ESOPs and VSOPs to employees. Building an employee stock option or virtual stock option can incentivize your team.

  • Have a clear strategy. Speaking to potential exit investors too early can send the wrong signals to the market, especially if you have to go back to them later. Create a cohesive strategy with an M&A advisor.

A version of this article is included in Startup Guide Germany, alongside many more expert insights and useful tips. Order your copy now!

Written by Alexandra Connerty.
Repackaged by Hazel Boydell.
All photos: Startup Guide Germany