Deal Structuring

Question & Answer

What are the different types of exit strategies?

Exit strategies refer to the method by which an investor, owner, or business intends to liquidate their position in an asset to achieve their financial goals. Various exit strategies are suited to different circumstances, objectives, and types of businesses. Here are some of the common exit strategies:

Initial Public Offering (IPO):

  • Offering shares of the business to the public in a new stock issuance.
  • Suitable for companies that have grown to a sufficient size and need capital to continue expanding.


  • Selling the business to another company or merging with another entity.
  • Often used by businesses that have reached maturity or by those in industries where consolidation is common.

Management Buyout (MBO):

  • Management team buys out the current owner’s stake, taking control of the company.
  • Works well for businesses with a strong management team that has the financial capability to perform the buyout.

Employee Stock Ownership Plan (ESOP):

  • Selling shares of the company to employees.
  • Designed to engender a sense of ownership and loyalty among employees and may offer tax advantages.

Family Succession:

  • Passing the business on to a family member.
  • Common in family-owned businesses where there is a desire to keep the business within the family.

Strategic Alliance or Joint Venture:

  • Forming a strategic partnership or joint venture with another company.
  • This can serve as an interim exit strategy, providing liquidity without full divestment, or as a step towards a full acquisition.


  • Selling off assets for cash and closing the business.
  • Typically considered a last resort and often used when the business is no longer viable.

Buyback by the Company:

  • The company buys back its shares from an investor or owner.
  • This can be an attractive option in situations where an investor needs to exit but the business is performing well.


  • Restructuring the business’s debt and equity mixture, often by bringing in new investors.
  • Can provide liquidity to the current owners while bringing in fresh capital for growth.

Private Equity Sale:

  • Selling the business to a private equity firm.
  • Private equity investors often seek to grow the company before exiting through one of the aforementioned strategies.

Each exit strategy has its own implications for taxation, control, and financial outcomes. The choice of strategy often depends on the owner’s objectives, market conditions, and the business’s financial health.

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