COVENANT BUSINESS PLANNING SOLUTIONS

Other Exit Options

In this blog series, we have written about the different Exit Options including Transfer to Family Members, Selling the business to one or more key employees, Selling to employees using an Employee Stock Ownership Plan (ESOP), Selling to one or more co-owners, Selling to an outside third party, and Engaging in an Initial Public Offering.

There are additional other options which might be considered by business owners developing a strategy for exit. Those options can include:

MERGERS

Another option for exit, which might be appropriate for a small subset of companies, is a merger.  If you are considering this option, you should either be prepared to take control of the merged entity or become a passive player in an organization controlled by shareholders.

HIRING PROFESSIONAL MANAGEMENT

Some business owners exit the operational running of their companies by hiring professional management, focusing instead on overseeing the company.

MANAGEMENT BUYOUT

A Management Buyout (MBO) should only be considered where management has the necessary aptitude to run the business and a strong desire to take control.

REFINANCING

Obtaining a loan, preferred shares or other form of financing for your company may be one way of fulfilling at least a partial exit, from a financial point of view.

EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)

This option generally suits those types of owners who wish to take some money off the table, so that they may financially diversify their portfolios.

For certain, qualified business, other benefits may include the elimination of capital gains taxes, eliminating business income taxes, maintaining complete control and benefiting key employees.

LIQUIDATION

Liquidation may be an answer if the business owner realizes the business is not saleable, or because the business has little or no value.  Liquidation can also present opportunities.  If the business you own is on valuable property, liquidation may net a larger sale price than actually selling the business as a going concern.  However, if you own a profitable business, liquidation should be considered only as a last resort only if you cannot find a buyer.

BUILDING YOUR TEAM to ASSIST YOUR EXIT

The sale of a business (and eventual exit) almost always involves a team of individuals.  Building and utilizing a team offers individual specialized skills, and synergy will result.  Synergy is defined as the “combined efforts being greater than parts.” 

In our next blog, we’ll talk more about building that team to assist your exit.