Every business owner(s) or shareholders should have an exit strategy because there will inevitably come a time when the business itself reaches the end of its life or the owners wish to leave the business and move on. But what exactly is an exit strategy in practice? Here’s a brief guide to explain…
The confusing thing about exit strategies is that there are different types depending on the type of business and what the owners wish to get out of it.
One of the most common exit strategies is a management buyout where current management purchase the company from an owner who wishes to sell their shares in the business. There may even be others from outside the company who join incumbent management to raise sufficient funds.
You may also have heard businesses being sold on for a pound which is often the case when a large company is threatened with insolvency and a buyout will seem like the best way to preserve the company.
If a business is found to be no longer viable then an exit strategy would be to go into administration so that parts of the company can be sold off while its assets are protected from creditors. This gives an opportunity to turn around those parts of the business that can be rescued.
Sometimes no matter how many attempts are made to save a business it simply cannot be rescued and the most likely exit strategy will be Creditors Voluntary Liquidation (CVL) where assets are sold off an liabilities settled where possible.