Tuesday 7 August 2012

3 elements for an exit planning

Elements
1. Strategic elements linked to the business environment
 an exit is attractive for the entrepreneur only if potential buyers are interested in the firm 

2. Entrepreneur’s personal aspirations
 for most entrepreneurs, the business venture is a dominant part of their lives 

3. Business financial situation 
for example, it might be difficult to list a company that has a high debt to equity ratio (leverage) 

The Process 
1. realistic valuation
if impatience is the enemy of an attractive harvest, then greed is its executioner 

2. outside advice
it is recommended to find an advisor who can help craft a harvest strategy while the business is still growing 

Options 

1. Succession – pass over to next generation 
2. Strategic buyer/s 
*Financial sales - buyers - primarily to a firms stand.
*Strategics sales - strategics buyers expert synergies with their other holdings.
*Management buyouts - the founder sells to managers or existing partners in the business.

3. MBO
Management buyout
high level debts
requires a company can offer a large sums of cash or can pay off the debt.

4. Merger / strategic alliance 

A strategic alliance is an ongoing relationship between two businesses in which they combine efforts for a specific purpose

If the strategic alliance takes place between competitors, it can often lead to a merger of the two companies later

In this case, the two companies merge to form a new legal entity

5. IPO - Initial public offering 
shares are placed for sale on a public stock exchange

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