Checklist of Major Exit Options in Business

Here are 6 of the most common exit strategies for you to consider in detail:

  1. Sale of the business in the usual manner:
    Here individuals or another organisation buys the business. You will have to find a willing buyer to take the business over and you will receive your cash on settlement.

  2. Buy-out of the company or corporation by shareholders or management:
    This results in one or more of the shareholders or management buying out other shareholders. You have to make sure the buyers have sufficient cash for the buy-out, and the result will be cash received by you, as the owner, or by present shareholders.

  3. Trade sale or acquisition:
    Here another company or organisation buys the business outright in what is known as a trade sale. The “fit” has to be appropriate with the management changing and the present corporate identity may disappear. The current shareholders will receive cash or shares and a management contract can be negotiated for current managers.

  4. Merger with another company or business:
    This involves joining your company with an existing company. It means an expanded business with new partners and less control for you and your current shareholders. You may receive some cash, as well as shares, for settlement. The advantages are that resources will be combined, including management. Rationalisation will also involve reduced costs and the increased market share would benefit the combined group.

  5. Franchise the business:
    Here the business is converted into a franchise-type concept, which should result in faster growth. The business must be appropriate for franchising. This will generate cash and result in fast expansion, while retaining most of the current management.

  6. Sell shares to the public through an IPO (initial public offering):
    Here the company is converted into a public company where the shares can be sold to the public through the stock exchange. The company has to have potential to receive an IPO, but the process is costly and the outcome is usually uncertain. This will enable the current owners or shareholders to convert their shares to cash and thus unlock the large investment funds they put up in the beginning to start and grow the business. It will also result in the major shareholders maintaining control, but the upside is that potentially the returns could be very attractive.

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