German Market Exit Strategy

A strategic acquisition – In a strategic acquisition, another company purchases your business, either with cash or stock in the acquiring company or with some combination of stock and cash. The acquirer may or may not retain you and your management team, and may or may not make substantial changes in your company's operations, staff, and business lines. "The benefit is typically liquidity because if you sell the company to a strategic acquirer you might be able to sell most or all of your stock," Fitzgerald says. The disadvantage of this exit strategy is that "you are likely to lose operating control," he adds. "The management team may have run the company for a long time and enjoyed the freedom of controlling day-to-day operations. Selling the company to a strategic acquirer probably means they'll give that up."

Management buyout – If you decide to recapitalize and sell the company to the next generation of managers it is known as a management buyout. This type of transaction is usually financed through some combination of debt and/or private equity investment, with the debt collateralized by the assets of the company. It provides immediate liquidity to the owner and early shareholders, and allows the company to continue as a private enterprise. "The benefit," Fitzgerald says, "is that you usually have a smoother transition." The founders most likely are not managing the company on a day-to-day basis, ceding that to the management team, which is now buying the company. This exit strategy marks a change of ownership, gets the shareholders some liquidity, yet provides a seamless transition for the company and employees and other constituencies.