Professional Documents
Culture Documents
McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. Shepherd
Exit Strategy
15-2
Table 15.1 - Succession Planning
Tips
15-3
Succession of Business
15-4
Succession of Business (cont.)
15-5
Options for Selling the Business
Direct Sale
Strategies to be considered:
Focus on a narrow, well-defined segment.
Control costs and focus on higher margins and profits.
Get all financial statements in order.
Prepare a management documentation.
Assess the condition of capital equipment.
Get tax advice.
Get nondisclosures from key employees.
Try to maintain a good management team.
Prepare and plan in advance.
15-6
Options for Selling the Business
(cont.)
15-7
Options for Selling the Business
(cont.)
15-8
Options for Selling the Business
(cont.)
Advantages:
Motivates employees to put in extra time or effort.
Provides a mechanism to pay back loyal employees.
Allows transfer of business under a planned written
agreement.
Permits the company to reap the advantage of
deducting contributions on ESOP or any dividends paid.
15-9
Options for Selling the Business
(cont.)
Management Buyout
Usually involves a direct sale of the venture for
some predetermined price.
To establish a price, the entrepreneur should:
Have an appraisal of all the assets.
Determine the goodwill value established from past
revenue.
Sale of a venture can be:
For cash.
Financed through banks
Through sale of voting or nonvoting stock.
The entrepreneur may agree to carry a note.
15-10
Bankruptcy—An Overview (cont.)
Bankruptcy lessons:
Too much time and effort is spent on
diversifying in markets where entrepreneurs lack
knowledge.
Bankruptcy protects entrepreneurs from
creditors, not from competitors.
It is difficult to separate entrepreneurs from the
business.
Entrepreneurs should file for bankruptcy early.
Bankruptcy needs to be shared with employees
and everybody else involved.
15-11
Bankruptcy—An Overview (cont.)
15-12
Chapter 11—Reorganization
15-13
Chapter 11—Reorganization (cont.)
Surviving Bankruptcy
Bankruptcy can be used as a bargaining chip to
voluntarily restructure and reorganize the
venture.
File before failure of cash or revenue.
Chapter 11 should be filed only if a chance of
recovery exists.
Be prepared for examination of transactions for
fraud.
15-14
Chapter 11—Reorganization (cont.)
15-15
Chapter 13—Extended Time
Payment Plans
Individual creates a five-year repayment
plan under court supervision.
A court appointed trustee receives money
from debtor.
Bears responsibility for making scheduled
payments to all creditors.
About two of every three Chapter 13 filers
ultimately fail to meet their planned
obligations, thus resulting in a Chapter 7
filing.
15-16
Chapter 7—Liquidation
15-17
Table 15.2 - Liquidation under
Chapter 7 Involuntary Bankruptcy
15-18
Strategy During Reorganization
15-20
Table 15.4 - Warning Signs of
Bankruptcy
15-21
Starting Over
15-23
Business Turnarounds
15-24