It is a planned approach for an investor, entrepreneur, or business owner to withdraw from an investment, business venture, or startup, usually to maximize returns or minimize losses.
Common types of exit strategies includes initial public offering (IPO), acquisition / merger, buyback, secondary sale, liquidation and management buyout (MBO).
An exit strategy is a planned approach for an investor, entrepreneur, or business owner to withdraw from an investment, business venture, or startup, usually to maximize returns or minimize losses.
It outlines how and when the individual or entity plans to sell their stake or exit the business.
For Investors: Helps recover capital and earn returns.
For Entrepreneurs: Provides a roadmap for stepping away or cashing out after building a business.
For Stakeholders: Signals long-term planning, professionalism, and risk management.
A clear exit strategy is often a requirement from venture capitalists or private equity firms before they invest in a business.
The company offers shares to the public for the first time. Investors can sell their shares in the open market after a lock-in period.
The business is sold to another company. This is common in the startup world, where a larger company acquires a smaller one for its technology, talent, or market share.
The company’s original owners or promoters buy back shares from investors.
An investor sells their stake to another investor (like a private equity firm or strategic investor).
The company is shut down, and its assets are sold. This usually happens when the business is no longer viable.
The company’s management team purchases the business from its owners.
Market conditions
Business valuation
Investor expectations
Tax implications
Legal and regulatory factors
Impact on employees and customers