How Bonds can impact exit strategy

For many construction business owners, an exit strategy, whether through sale, management buyout/EOT, or succession is built over years. While financial performance and order book are often front of mind, one area that can materially impact an exit is frequently overlooked: surety bonds and the Deed of Indemnity that underpins them. Understanding how bonds and indemnities interact with ownership change is essential to protecting value at exit.

The Role of the Deed of Indemnity

When a contractor enters into a surety bond arrangement, the directors and shareholders typically sign a Deed of Indemnity in favour of the surety. This document gives the surety recourse to the indemnitors should a bond be called. In practice, the Deed of Indemnity places numerous obligations upon the indemnitors, with one key obligation being the surety’s right to make an on-demand call for all outstanding bond exposure upon any non-consented change of ultimate control of any indemnitors. 

Managing Bonds to Protect Exit Value

Proactive bond management can significantly improve exit outcomes:

• Reducing legacy bond exposure by allowing bonds to expire or be replaced ahead of sale

• Restructuring indemnities to limit or release personal guarantees where possible

• Aligning surety support with the post-transaction ownership structure

• Engaging sureties early to avoid last-minute approvals or renegotiations

  
  

These steps help ensure that exiting shareholders are not left with open-ended liabilities.

As a specialist surety bond broker DRS can play a critical role well before an exit is contemplated. By understanding a client’s long-term objectives, we can structure bonding facilities that are flexible, transparent and capable of evolving alongside the business. During a transaction, we act as an intermediary between sellers, buyers and sureties - helping to manage approvals, negotiate revised indemnities and ensure continuity of bond support.

An effective exit strategy is about certainty for sellers, buyers and funders alike. Bonds and Deeds of Indemnity should support that certainty, not undermine it. By addressing surety arrangements early, business owners can protect value, reduce personal risk and achieve a cleaner, more predictable exit.

If you need support in managing your bonding pipeline, please get in touch and we will be happy to help.