Exit Strategies for Entrepreneurs | New Topic [2024]

In this note, we are discussing about Exit Strategies for Entrepreneurs – Merger and acquisition exit, Initial Public Offering (IPO), Liquidation, and Bankruptcy. Welcome to the Poly Notes Hub, a leading destination for Diploma Engineering Notes.

Author Name: Arun Paul.

Exit Strategies for Entrepreneurs

1. Merger and Acquisition Exit

This is the procedure via which a business exits the industry by merging with another business (merger) or purchasing another business (acquisition). It may be motivated by a number of things, including financial gain, cost reduction, market expansion, or strategic alignment. The firm being bought usually gets compensation in an M&A exit; this compensation is frequently in the form of cash, shares, or a mix of the two.

3. Initial Public Offering (IPO)

A privately held firm can become a publicly traded company by first offering its shares to the public through an initial public offering (IPO). This gives access to capital markets for generating money and permits the company’s ownership to be divided among many shareholders. It is frequently pursued as a way to finance expansion or give current owners liquidity.

3. Liquidation

It is the process of closing up a business and selling its assets to settle debts. This usually happens when a business can’t make ends meet or is insolvent. A predetermined hierarchy is used to allocate the proceeds from the asset sales among the creditors, with secured creditors receiving preference over unsecured creditors and shareholders.

4. Bankruptcy

It is a legal process that allows individuals or businesses to seek relief from their debts when they are unable to repay them. It involves either liquidating assets to pay off debts or reorganizing debts and establishing a repayment plan. Bankruptcy can be initiated voluntarily by the debtor or involuntarily by creditors seeking repayment.