The PPT is for reference purpose.

1. ENTREPRENEURSHIP DEVELOPMENT – KMB 402
Topic: Revival, Exit and End to a Venture
(Part 2 of 2)
ACHLA TYAGI, ABES EC (032), AKTU, LUCKNOW

2. Exit Strategies
Meaning
A business exit strategy is
an entrepreneur's strategic plan to sell
his or her ownership in a company to
investors or another company. An exit
strategy gives a business owner a way
to reduce or liquidate his stake in
a business and if the business is
successful, make a substantial profit.
Business Exit Strategies/
Venture Capital Exit Options
• Initial Public Offering (IPO)
• Mergers & Acquisitions
• Shares Buy Back
• Sale to other Strategic Investor
• Sale in OTC Market
• Management Buyout (MBO)
• Transfer Ownership to Family
ACHLA TYAGI, ABES EC (032), AKTU, LUCKNOW

3. Initial Public Offering (IPO)
• Also called as Stock Market Launch.
• Involves a private company offering its
shares to the public for purchase for
the first time.
• The original investors in the private
company can make fortunes because
the new stock is worth much more
than their original investments.
• The Initial Public Offering IPO Process
is where a previously unlisted
company sells new or existing
securities and offers them to the
public for the first time.
• Prior to an IPO, a company is
considered to be private – with a
smaller number of shareholders,
limited to accredited investors (like
angel investors/venture capitalists and
high net worth individuals) and/or
early investors (for instance, the
founder, family, and friends).
• After an IPO, the issuing company
becomes a publicly listed company on
a recognized stock exchange. Thus, an
IPO is also commonly known as “going
public”.
ACHLA TYAGI, ABES EC (032), AKTU, LUCKNOW

4. Mergers & Acquisitions
Mergers and Acquisitions (M&A) are defined as consolidation of
companies. Differentiating the two terms, Mergers is the combination
of two companies to form one, while Acquisitions is one company
taken over by the other. As an aspect of strategic management, M&A
can allow enterprises to grow or downsize, and change the nature of
their business or competitive position. From a legal point of view, a
merger is a legal consolidation of two entities into one, whereas an
acquisition occurs when one entity takes ownership of another entity's
stock, equity interests or assets.
ACHLA TYAGI, ABES EC (032), AKTU, LUCKNOW

5. Shares Buy Back
A buyback, also known as a share repurchase, is when a company buys
its own outstanding shares to reduce the number of shares available on
the open market. Companies buy back shares for a number of reasons,
such as to increase the value of remaining shares available by reducing
the supply or to prevent other shareholders from taking a controlling
stake. Venture Capitalists consider it as an exit option only when
promoters are in position to mobilise funds for buy back of equity held
by the venture investors.
ACHLA TYAGI, ABES EC (032), AKTU, LUCKNOW

6. ACHLA TYAGI, ABES EC (032), AKTU, LUCKNOW
Source: Melissa Ling, Investopedia, 2019.

7. Sale to other Strategic Investor
A Venture Capitalist sells his stake to the strategic buyer who already
owns a business or has plans to enter target industry. The benefit is
typically liquidity because if the venture capitalist sell the company to a
strategic acquirer he/she might be able to sell most or all of their stock.
The acquirer may or may not retain the management team, and may or
may not make substantial changes in the company's operations, staff,
and business lines.
ACHLA TYAGI, ABES EC (032), AKTU, LUCKNOW

8. Sale in OTC Market
OTC (Over The Counter) can be used to refer to stocks that trade via a
dealer network as opposed to on a centralized exchange.
OTC markets are typically bifurcated into the customer market – where
dealers trade with their clients such as corporations and institutions –
and the interdealer market - where dealers trade with each other.
The price a dealer quotes to a client may vary from the price it quotes
to another dealer.
ACHLA TYAGI, ABES EC (032), AKTU, LUCKNOW

9. Management Buyout (MBO)
A management buyout is a form of acquisition in which a company's
existing managers acquire a large part, or all, of the company, whether
from a parent company or non-artificial person.
A management buyout (MBO) is appealing to professional managers
because of the greater potential rewards from being owners of the
business rather than employees.
The financing required for an MBO is usually a combination of debt and
equity that is derived from the buyers, financiers and sometimes the
seller.
ACHLA TYAGI, ABES EC (032), AKTU, LUCKNOW

10. Transfer Ownership to Family
There may come a point when a business owner will want to turn over
their business to one of their family members. This could be due to a
variety of reasons. Perhaps they are going to retire and wish to entrust
their business with a family member who they know will run it well.
Either that or the business owner may just want to sell their business
to a family member or give it to them as a gift.
ACHLA TYAGI, ABES EC (032), AKTU, LUCKNOW