Exit Strategies

Chapter Objectives
To understand the importance of an exit strategy To appreciate the significance of planning ahead for a sale To list the factors to be considered for preparing a business for a sale To discuss the issue of communicating your intention to sell to employees To debate the merits of financing the sale of your business To analyse the sale process, in a step wise manner To discuss the benefits of an IPO To list the responsibilities that comes with public listing To understand the process of listing a share

Reasons for Exit

Lack of profits Loss of interest Future prospects Dissolved partnership Growth prospects Other opportunities Personal reasons Favourable economic conditions

Long Term Preparation

Focus Large customer base Diversified customer base Regulatory compliances Land documents Contracts Management

Short Term Preparation

Valuation Update books Supporting documents Take tax advice Get a team in place Continue business as usual First impressions

Seller Financing
Benefits to seller: The buyer may be prepared for a higher price on such terms It assures the buyer that the seller is convinced of the long term viability of the business The seller gets further profits by way of the interest on the investment This may be a good way to profitably park funds for a while

Risks to seller: Business may fail before the buyer makes full repayment The buyer may decide not to make any further payments The seller might get persuaded to participate in the business as well

The Sale Process

Authorisation from partners/directors Get legal or accounting team in place Review records and identify issues List assets and liabilities Draw up the agreement Finalise the deal Transfer the assets

Benefits of an IPO
Access to risk capital Increased public image Stock options Facilitates M & A activity Liquidation

Responsibilities on Getting Listed

Sharing corporate control Sharing financial gain Managing shareholder value Sharing strategic information through periodic reporting

Issuing an IPO
Choose investment banker. Select underwriter for the issue File registration document with the exchange Come out with a red herring prospectus indicating initial price range Go on a road show Set final offer price Get listed on appointed date

Listing Norms at BSE

The minimum post-issue paid-up capital of the Company shall be Rs. 3 crores; and The minimum issue size shall be Rs. 3 crores; and The minimum market capitalization of the Company shall be Rs. 5 crores (market capitalization shall be calculated by multiplying the post-issue paid-up number of equity shares with the issue price); and The minimum income/turnover of the Company should be Rs. 3 crores in each of the preceding three 12-months period; and The minimum number of public shareholders after the issue shall be 1000. A due diligence study may be conducted by an independent team of Chartered Accountants or Merchant Bankers

THANKS