Strategic commercial interventions: assurance playbook

Exit Strategy Principles

What is it?

An exit strategy primarily is a plan for selling or disposing of a financial or business asset when certain conditions have been met or exceeded. It is important that this exit strategy revolves around maximising value and ensuring a smooth transition for the business where applicable. A well-executed strategy in advance is easier to monitor through the life cycle of an intervention.

In practical terms this guidance outlines the key components of Strategic Commercial Assets Division (SCAD) Exit Strategy including the key aspects of a good strategy, the requirement for a benefits realisation plan, the criteria to consider before divestment, and the options available for divestment. It also sets out the role of Scottish Governments (SG) sales process and the appropriate engagement required within each stage.

What is its purpose

Having an exit strategy in place ensures that the potential outcome of investments is considered at the outset and revisited regularly. In recent years SG has made interventions into a diverse range of strategic commercial assets.

Strategic assets are defined as an otherwise commercial assets (where the sectoral operating model is Private Sector led), and where a tactical (and time limited) intervention is considered and made to benefit communities in Scotland and maximise the public good.

As interventions are time-limited, there will at some point be a need to exit. The rationale for setting out an exit strategy in advance is to help to guide the nature of the exit (divestment) and its timing to maximise the return on investment and to secure the benefits.

This guidance sets out best practice in relation to devising and reviewing appropriate exit strategies across existing commercial assets and in consideration of any future interventions.

SCAD’s Exit Strategies are intended to primarily focus on how SG’s consideration of divestment of the commercial assets currently managed within SCAD such as Glasgow Prestwick Airport, Ferguson Marine (Port Glasgow) and the Lochaber guarantee by sponsor teams. However, the intention is also that the principles laid out in the technical guidance can be applied to similar scenarios in other areas of the Public Sector as required.

When should it be used

For business interventions, the Exit Strategy guidance should be used in conjunction with the Monitoring Framework which sets out points of review to consider divestment options for an intervention. Determining optimal exit options should be undertaken, if time allows as part of the commercial / management case of the project business case and revisited and updated thereafter.

Useful Resources

Annex A: Business Investment Framework - Scottish Public Finance Manual - gov.scot (www.gov.scot)

Good practice guide - Monitoring and responding to companies in distress (nao.org.uk)