Common Exit Strategies
Figuring out how to step away from a business can feel like a toss-up between a couple of big choices. Let’s dive into two crowd-pleasers: IPOs and mergers and acquisitions.
IPOs and Their Appeal
So, you’ve got an IPO, or Initial Public Offering. It’s like the glam red carpet of exits, where cash might not just line your pockets but pad them nicely. Holding an IPO means hitting the public trading scene, scoring the business owner some sweet liquidity, and unlocking bigger pots of cash for the company’s next big thing.
Newcomers, especially those dabbling in life sciences, seem to make a beeline for IPOs as their exit of choice. Going public is like putting on a shiny suit — new investors come a-knockin’, and with that, the company’s street cred gets a real boost.
| Good Stuff About IPOs | Not-So-Good Stuff About IPOs |
|---|---|
| Big bucks and shiny rewards | Bleeding cash and calendar-draining |
| Everyone knows your name (or at least, your company’s) | Stock market is like a rollercoaster |
| More cash options than a buffet dinner | Watch out for rule readers (regulations galore!) |
Interested in the nuts and bolts of taking a company public? Peep our exit planning process checklist.
Mergers and Acquisitions
Jumping over to mergers and acquisitions (M&A), think of them as the trade-off game of exit strategies. Here, you either meld with another business or wave goodbye after selling. Whether you’re going for a golden handshake or staying along for the ride, M&As can make your exit both sweet and profitable (Ansarada).
M&As are kind of like a choose-your-own-adventure story — flexible, less in the public eye, and usually more relaxed about all the rigid public rules hanging over IPOs.
| Upsides of M&A | Downsides of M&A |
|---|---|
| Cash in hand — pronto | Cultures like oil and water post-merger? Maybe. |
| Pick your path and run with it | Talks and teamwork can be tricky |
| Keep things rolling just the way you like | When your buyer’s like a fickle date at a buffet |
To see M&A magic in action, hop over to our exit planning case studies.
Whether it’s IPO or M&A, each has its perks and pitfalls. Picking the right one means getting cozy with the business goals and imagining where the company hopes to land down the road. Need a hand? A chat with an exit planning consultant might just do the trick.
For more ideas on jumping ship, explore our takes on the legal side of things at exit planning legal considerations and how to keep your finances in check over at exit planning financial considerations.
Factors Influencing Exit Decisions
Grasping what pushes a business owner to call it a day is a big deal if they’re mapping out how to step back from the company. Pivotal things to mull over are how much the business is worth and how much say they’ll still have in the company after moving on.
Business Valuation Importance
Nailing down how much a business is truly worth is like finding the golden ticket for anyone looking to bow out. A good, solid valuation gives both sellers and buyers a handle on the company’s worth, helping them to decide on a price that’s fair for everyone. Bringing in the pros for advice makes the transition smoother.
When pinning down a valuation, here’s what folks should keep an eye on:
| Metric | What It Means |
|---|---|
| EBITDA | It’s about getting a feel for the company’s financial health before costs eat away profits |
| Revenue Growth Rate | Checks how fast a company’s raking in more money over time |
| Market Comparables | Looks at what similar outfits are fetching these days |
Frequent check-ins on valuation make sure everyone’s rowing in the same direction with the market, timing, and goals, which can make or break the plan to exit. More about keeping your finances in check during all this can be found here.
Control and Future Company State
Deciding how much say you want to keep in the business once you’re no longer at the helm is another biggie. Some folks have their eyes set on still calling shots, while others are content to sign off and ride into the sunset with a nice payday.
Here’s a quick breakdown:
| Exit Idea | Control | What Happens Next |
|---|---|---|
| Selling to an Outsider | Little to None | The new boss might shake things up |
| Passing it to Family/Employees | Medium to High | Likely keeps running the same way |
| Merging with Another Company | It Depends | Changes hang on the new partner’s plans |
Making a choice here comes down to what feels right for both the pocketbook and personal legacy. It’s smart to get some help from an exit planning consultant who knows the ropes.
By figuring out the ins and outs of business value and future control, the person at the helm can craft their goodbye to fit both what they want in life and what they want for the business, all while smoothly handing over the reins.