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As a successful professional selling or exiting your business, selecting the most appropriate strategy for you is critical for achieving not just your potential for wealth, but your potential for living.
Here are the 10 types of exit strategies that you might consider when selling your business.
1. Strategic (Industry) Buyer
Strategic buyers often pay the highest price, however, may restructure the acquired company.
2. Financial Buyer (Via a Leveraged Buyout – LBO)
Strategic buyers often pay the highest price, however, may restructure the acquired company. Loans are typically used in financing the acquisition.
3. Management Buyout (MBO)
Family members and/or a group of current managers raise capital or debt to acquire the company.
4. Employee Stock Ownership Program (ESOP)
This regulated alternative allows the business owner to sell all or part of the company to a trust, which generally borrows money in order to affect the transaction.
5. Leveraged Recapitalization
The company borrows money and buys back shares from the owner (akin to a share buyback program offered by public companies from time to time).
6. Sale to a Foreign Investor
Foreign groups may acquire minority or majority share in U.S. firms. Typically, investors are firms linked to the U.S. company’s industry or supply chain.
7. Private Initial Public Offering (IPO) or Private Placement of Equity
Investment firms can be used to facilitate the acquisition of successful private or family-owned companies through organizing private (Accredited) purchasers.
8. Restructuring to Generate Liquidity to Buy Back Shares
In an effort to avoid dilution of ownership, other methods can be used to generate liquidity to buy back outstanding shares. These measures include facility consolidation, asset sales, or other means.
9. Estate Planning Transition Plans
With prior planning, owners can take advantage of a number of trust and estate alternatives for the gradual transfer of the firm to new shareholders (usually family members).
10. Taking the Company Public (IPO)
Using company stock in public markets creates immediate liquidity for shares sold.
WHICH STRATEGY IS RIGHT FOR YOU?
Familiarizing yourself with this list of potential exit strategies is just the start of formulating your strategic exit plan. You can spend your time clicking through thousands of pages of advice, but what you really need is clarity—to understand why it’s worth considering one option over another. And there is simply no substitute for sitting down with people who have worked with hundreds of people like you to co-create a customized plan.
The Monument Wealth Management Team specializes in working with business owners who are planning to exit their business. Holding your long-term goals as our focus, we can work with your trusted business exit team (likely a Mergers & Acquisitions Advisor, Investment Banker, Trust and Estate Attorney, Deal Attorney, CPA, and Wealth Manager), to help guide you through a successful business exit.
Visit our resources section for more wealth advice designed especially for business owners. Or subscribe to our podcast, where we interview experts on topics that matter to high-earning executives and business owners when it comes to building wealth.
Case Study: The Confidence to Sell a Business
Ready to talk to a wealth advisor about your exit plan?
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