Excerpted from
FastTrac® GrowthVenture™
Typical Exit Strategies
Every exit strategy has advantages and disadvantages. The chart on p. 2 highlights both
and may provide you with some considerations you have not thought of before. These exit
strategies can take a business to its next stage. As the business transitions to the next stage,
you may end your involvement or remain with the business in a new role.
© 2006 Ewing Marion Kauffman Foundation. All Rights Reserved.
Making Strategic Decisions
Setting Direction
Types of Exit
Strategies
Description
Advantages
Disadvantages
Merger with
Another
Company
Company joins with an
existing company.
Owner may receive cash
and/or stock, resources
of both companies are
combined, and some of
the management may
remain constant.
New owners or managers
may have different
philosophies or ways of
doing business, existing staff
may have less control, and
blending the two cultures
may be difficult.
Acquisition by
Another Company
Company is bought out by
another existing entity.
Owner receives cash or
stock for the sale and
management contract is
negotiable for the owner to
stay on during transition.
Fit is not always
appropriate for the
business or employees,
and the corporate identity
or brand may diminish.
Sale of the
Company
Company is sold to
individual(s).
Owner may receive cash
immediately or over time.
May be difficult to find the
right buyer at the right price
and changes in ownership
may be difficult for
employees.
Franchise of
the Company
The business concept
is replicated and the
company expands locally,
regionally, nationally, or
internationally.
Owner receives cash for
each franchise, current
corporate management
is maintained, and
the enterprise sees an
opportunity for largescale growth.
Process may be difficult and
time-consuming, and the
business concept may not be
appropriate for franchising.
Employee StockOwnership Plan
(ESOP)
Employees receive shares
or stock of the company
over time.
Key employees are
rewarded for their
contributions, receive
incentives for staying with
the company for a number
of years, and share in the
profits of the company they
have helped to grow.
Owner can borrow funds
from the plan as a loan to
the company, employees
may lose their shares if they
leave the company, and if
the value of the company
or company stock goes
down, the employees share
in the burden.
Initial Public
Offering (IPO)
Shares of the company
are sold to the public on
a stock exchange.
Shares convert to cash
for investors, major
shareholders control the
company, and investors see
potentially high returns.
Company needs high
growth to generate earnings
and investors’ interest,
process is costly, and the
outcome is uncertain.
© 2006 Ewing Marion Kauffman Foundation. All Rights Reserved.