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Exit approaching

Jan 26, 2024 | Cengiz Volkan


There are different approaches available to an owner who wishes to exit a company. What is the right option for your company?

When an owner wishes to exit a company, there are several approaches available to them. These approaches can vary depending on the owner's goals, the company's financial situation, and the market conditions. Here are some common exit planning topics and approaches:

  1. Sale to a third party: This approach involves selling the company to an external buyer, such as a competitor, strategic investor, or private equity firm. The owner may receive a lump-sum payment or structured payments over time.
  2. Management buyout: In a management buyout, the owner sells the company to the existing management team. This approach allows the owner to exit the business while ensuring continuity and potentially rewarding loyal employees.
  3. Employee stock ownership plan (ESOP): An ESOP is a retirement benefit plan that allows employees to acquire ownership of the company. The owner can gradually sell their shares to the ESOP, providing an exit strategy while retaining the company's legacy and preserving jobs.
  4. Family succession: If the owner wants to keep the business within the family, they can choose to pass down ownership and management to a family member. This approach requires careful planning, including addressing issues of fairness and ensuring a smooth transition.
  5. Initial public offering (IPO): In some cases, a company may have the potential to go public and offer shares for public trading. This approach can provide the owner with a significant financial windfall but requires compliance with regulatory requirements and preparation for the IPO process.
  6. Liquidation: When none of the above options are feasible or desired, the owner may choose to liquidate the company. This involves selling off the company's assets, paying off liabilities, and distributing any remaining funds to the owner.

In an exit planning engagement, a professional advisor, such as a business consultant or financial planner, can guide the owner through the process. They will assess the company's financial position, evaluate various exit options, and develop a comprehensive plan that aligns with the owner's objectives.

The engagement may include:

  1. Business valuation: Determining the company's worth is essential to establish a fair asking price or to negotiate terms with potential buyers.
  2. Financial analysis: Assessing the company's financial health, profitability, and growth potential to identify areas of improvement and enhance its marketability.
  3. Tax planning: Developing strategies to minimize tax liabilities associated with the exit.
  4. Succession planning: If the exit involves passing the business to a successor, the engagement may involve identifying and preparing the next generation of leadership.
  5. Legal considerations: Addressing legal aspects, such as reviewing contracts, intellectual property rights, and any regulatory compliance issues that may affect the exit process.
  6. Negotiation and deal structuring: Assisting the owner in negotiating the terms of the exit, including purchase price, payment structure, and any ongoing involvement or advisory roles. Overall, an exit planning engagement aims to maximize the owner's financial return, ensure a smooth transition, and protect the long-term sustainability of the company.


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