Exit strategies Flashcards
BUS304 (23 cards)
What is an exit strategy?
An exit strategy is a contingency plan executed by an investor, venture capitalist, or business owner to liquidate a position in a financial asset or dispose of tangible business assets once predetermined criteria have been met or exceeded.
What does an exit strategy outline for a business owner?
It outlines a process to reduce or liquidate ownership in a business and, if the business is successful, make a substantial profit.
What is a merger and acquisition (M&A) exit strategy?
An M&A exit strategy involves either merging with another company or selling a controlling interest in a business to a larger, more profitable investor.
What are the pros of an M&A exit strategy?
- Business owners can maintain control over price negotiations
- They can set their own terms
- Potential to drive the price up if selling to a competitor or entertaining multiple bids
What are the cons of an M&A exit strategy?
- M&A processes can be time-consuming and costly
- Regularly fail
What does selling your stake to a partner or investor allow?
It allows the company to continue running with no significant changes to its operations.
What are the pros of selling your stake to a partner or investor?
- Helps preserve legacies in the company
- Negotiation is often easier
- Minimal disruption to business operations
What are the cons of selling your stake to a partner or investor?
- Finding a buyer or investor can be difficult
- The sale may be less objective and not as lucrative
What is a family succession exit strategy?
The family succession exit is the idea of keeping a profitable business ‘in the family’.
What are the pros of a family succession exit strategy?
- Family members often have intimate knowledge of the business
- They can be prepared for transitioning into a leadership role over many years
What are the cons of a family succession exit strategy?
There may not be someone capable of taking on the role.
What is an Initial Public Offering (IPO)?
An IPO is a method of making a privately owned business public by selling shares of stock to the public.
What are the pros of an IPO?
The potential to earn a substantial profit, more so than any other exit strategy.
What are the cons of an IPO?
- Intense scrutiny from stockholders, regulatory bodies, and the public
- Additional requirements for mandatory reporting
What does liquidation involve?
Liquidation involves closing the business and selling all its assets.
What are the pros of liquidation?
- Simple and fast exit strategy if the business runs well
- The business is completely gone after liquidation
What are the cons of liquidation?
- Not likely to be a high-value exit
- Breaking ties with employees, partners, and customers
What is bankruptcy as an exit strategy?
Bankruptcy is an exit strategy of last resort that allows a company to get debt relief while its assets are seized.
What is a significant characteristic of bankruptcy?
It requires minimal paperwork and allows the business to rebuild its credit.
M&As?
You can use the free tools provided in Ansarada Deals™ (a platform) to help:
Organize and prepare for a merger or acquisition (M&A),
Manage the entire deal process smoothly, and
Improve your chances of getting a better price (valuation) for your company.
🧠 Why it matters:
M&A deals can fall apart if the company isn’t well-prepared or if the process gets messy.
Ansarada Deals™ offers tools (like document tracking, deal checklists, timelines, etc.) to make things faster, clearer, and more professional.
This helps impress buyers or investors, which can lead to a higher company value during negotiation.
Selling stakes to an investor, as an exit strategy?
If you own part of a business (not the whole thing), one way to exit is to sell your portion (or shares) to another investor.
💡 Example:
Let’s say you’re a co-founder or early investor in a company.
You no longer want to stay involved or need to cash out.
You can sell your shares to a new investor who wants in — this is your exit.
New investors like this kind of deal because:
They can buy in without disrupting the company.
The same leadership and daily operations usually stay the same.
This makes it a low-risk, stable investment.
Selling to a new investor instead of shutting down or restructuring helps keep the original vision and culture of the company alive.
It’s often easier to negotiate with someone who wants to keep things running smoothly, rather than someone who wants big changes or control.
Bottom Line:
This exit strategy (selling your stake to an investor) is a clean, respectful, and less disruptive way for non-owners (like investors or partners) to leave the business — and it’s appealing to both the person leaving and the person coming in.
IPO Pros & Cons?
📈 IPO Pros
Huge potential profit
⚠️ IPO Cons
Heavy public scrutiny
📈 IPO Pros
Global visibility
⚠️ IPO Cons
Constant reporting
📈 IPO Pros
Liquidity for investors
⚠️ IPO Cons
Expensive and difficult prep
📈 IPO Pros
Access to more capital
⚠️ IPO Cons
Time-consuming regulations
List the types of exit stratigies, and mention who;s the related part (individual or partner or investor or els…)
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