Exit planning is the preparation for the exit of an entrepreneur from their company to maximize the enterprise value of the company in a mergers and acquisitions transaction and thus their shareholder value, although other non-financial objectives may be pursued including the transition of the company to the next generation, sale to employees or management, or other altruistic, non-financial objectives.
[4] To achieve their desired outcomes, business owners often focus their attention on exit planning from the beginning of the investment, in order to prepare adequately for trade and financial sales, make effective use of the buy back option, market their businesses more widely for sale, use intermediaries and get the support of management[5] Significant value is lost due to an absence of or inadequate exit planning.
Roughly 30% of businesses will be transferred to family member in some manner, 18% intend to sell to its employees, and many will simply be closed.
[10] Most small-to-medium-sized businesses use a boutique investment bank to market their company in a mergers and acquisitions transaction to potential buyers.
Private equity groups are common acquirers of middle market businesses, whether as "platform" companies or add-on or tack-on acquisitions.