For
private company owners,
managing a successful exit
from their company is perhaps
the single most important
event in the historical
growth and maturity of
the company. Exit
Strategy Development is
the process of preparing
for the future ownership
transfer of your company
to others.
A well
thought out exit plan,
with written
goals, values, and objectives
is indispensable to the
transfer of the company
and achievement of the
shareholder’s long-term
goals. |
"Despite
the fact that private business
owners have 75% of their
net worth tied up in their
business, 85% of all these
owners do not have a defined
exit strategy."
Recommended
article:
"Do
you have an exit plan?" |
First
Business Resources, Inc. will neutrally assess
each probable exit strategy and recommend the
most realistic
exit plan with focused regard
to the company’s
current circumstances, the
specific requirements of the shareholders,
and the interests
of
management and employees.
Shown
below, are the most common
exit strategies for private
company owners to consider
along with brief advantages
and disadvantages of each.
Sale
of Company to Strategic Company:
- Description:
Business purchased outright
by another existing company
- Advantages:
Often purchased by strategic
partner or competitor;
management contract can
be negotiated
- Disadvantages:
Separate corporate cultures
must be successfully integrated;
potential management changes;
corporate identity may
disappear
Sale
of Company:
- Description:
Business bought by other
individuals or entities
- Advantages:
Normally sell 100% of company;
post transaction involvement
is minimized
- Disadvantages:
Must find willing and qualified
buyer; normally results
in new management
Merger:
- Description:
Join an existing company
- Advantages:
Corporate resources
are combined; current
management may stay
- Disadvantages:
New investment partners
or management, less control,
may receive little or no
cash
Shareholder
or Management Buy-Out:
- Description:
One or more stockholders
buy out the others or existing
management purchases company
- Advantages:
Normally sell 100% of
company; other owners/management
remain in control of
the company; corporate
identity
and employee base remains
primarily intact
- Disadvantages:
Seller must be willing;
buyers must have sufficient
cash to complete transaction
Family
Succession:
- Description:
The company is passed on
to the heirs during the
owner's lifetime or at
death
- Advantages:
Continuity of ownership;
additional estate planning
options
- Disadvantages:
The desire or capability
of family members to
"run" and "expand" the
company
Employee Stock Ownership Plan:
- Description:
A qualified, defined employee
benefit plan that invests
primarily in the stock
of the employer company
- Advantages:
Provides
a ready market for the
sale of the company stock
- Disadvantages:
Corporate governance issues;
regulatory requirements;
the expense of an ESOP
may be cost prohibitive
for smaller companies
- First Business Resources
can recommend an ESOP specialist
to its clients to evaluate
and implement this type
of exit strategy.
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