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Why is Your Best Liquidity Exit

There are many possible liquidity alternatives or exits for business owners. In the following months, this blog will highlight the most realistic strategies for partial or complete exits from private companies.

The range of exits includes the following:

  1. Initial Public Offering (IPO)
  2. Sale to outside buyer
  3. Employee Stock Ownership Plan (ESOP)
  4. Recapitalizations
  • Controlling interest to financial buyer
  • Minority equity
  • Senior debt
  • Subordinated debt (mezzanine)
  • Combined with growth debt
  1. Equity Incentive Plan
  • Stock options
  • Restricted stock
  • Stock Appreciation Rights (SAR's)
  • Phantom stock

IPO

This alternative is usually only available to companies of a certain size in revenues. However, there are numerous examples of public shell companies and early stage technology / venture backed firms with no revenues. It is often said that publicly-traded companies with a market capitalization (cap) of less than $100 million should not be public. One reason is that they attract either little attention (re: investment) or they are potentially subject to financial irregularities. Further, the accounting and legal fees for even small public entities usually exceed a minimum of $200,000.

Initiating an IPO or buying a public shell is often a last resort for raising equity. And secondary public capital raises for smaller cap firms are usually difficult to accomplish. Suffice it to say, the IPO route is the lease advantaged to the small business owners.

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