The ABCO Group has officially transitioned into a holding company geared towards strategic investment opportunities. Our focus is on acquiring successful businesses whose owners seek an exit strategy for various reasons.
But what is an exit strategy, and why is it important to have one in place? We take a look.
What are Exit Strategies?
Exit strategies are plans and infrastructure designed for business owners to liquidate their positions in the business. In the case of the ABCO Group, we assist those looking to dispose of an investment or leave a business venture by helping them build out their exit strategies. With an exit strategy in place, a closure or handover of the business can only take place once certain conditions are met, allowing for a smoother process. Business owners, investors, venture capitalists, and traders usually create and adopt exit strategies.
What are the Different Types of Exit Strategies?
- Initial Public Offering: An Initial Public Offering (IPO) occurs when a company takes the significant step, ceasing to trade as a private entity, and goes public. This means it registers on the stock market, so shares of the company are up for purchase. The process is complex and requires businesses to meet regulations set by the Securities and Exchange Commission. An IPO is a strategy often used by founding members of a company and initial private investors, as this is an ideal time for them to see a return on their investments.
- Mergers and Acquisitions: While these terms are used interchangeably, they have different meanings. A merger occurs when similarly sized businesses combine to form a new company. Acquisitions occur when one company buys another, or at least the lion’s share of its assets. There are several types of mergers and acquisitions (M&A), each appropriate for different circumstances.
- Private Equity Investment: When a private-equity firm acquires a business, the process is referred to as Private Equity Investment. The firms invest in companies in return for equity held in shares in the business, and they maintain the right to purchase more equity in the future.
- Private Investment in Public Equity: This occurs when an accredited investor, mutual fund, or investment firm buys shares from a newly public company below market price. This practice works well when a new company is looking to raise capital.
Important Takeaways About Exit Strategies
Preparation is crucial in business, so even if your revenue is up or your company is expanding, have an exit strategy in place in case you’re faced with the unexpected. Some situations which could cause you to need an exit strategy are:
- Death or sudden illness
- A family crisis
- An economic downturn or recession
- A lucrative unexpected offer
At the ABCO Group, many of our clients seek exit strategies from their successful businesses due to retirement. We can facilitate a smooth transition and ensure that the best team members are in place to continue the company’s strong performance.
If you’re interested in learning more about how a comprehensive exit strategy can benefit you, get in touch with us, and we’ll be happy to assist.