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“All things change…There is nothing in the whole world which is permanent. Everything flows onward…the ages themselves glide by in constant movement.”
--Ovid, 10 B.C.
Exit Strategies Sell or transfer ownership to insiders Sell or transfer ownership to outsiders Take the company public through an
IPO
Leveraged Buyouts Managers borrow money to pay the
owner an agreed-upon price. The new owners pledge their stock as
collateral, or… Lenders accept an equity position in the
company to cover part or all of the funds.
Selling to Outsiders Sell at the right stage Sell when the business cycle is strong Compensate for loss of talent Identify and protect intellectual property Adopt transparent and conservative
accounting policies Resolve open questions that make it difficult
to estimate value
Balance Sheet Methods Balance sheet method
Net worth = Assets – Liabilities Adjusted balance sheet method
Estimates market value of assets
Earnings Methods Excess earnings method Capitalized earnings method Discounted future earnings method
Advantages of IPOs Cash Aura of respectability Market provides continuing valuation of
worth Ability to use stock options for
employees Ability to use stock to acquire other
companies
Disadvantages of IPOs A tremendously
expensive process Lock-up
agreements Subject to careful
scrutiny
Bargaining Tactics Beginning with an extreme initial offer Using the “big lie” technique Convincing the other side you have an
“out”
Reaching Integrative Agreements Logrolling Nonspecific compensation Broadening the pie Cost-cutting Bridging