Week 7 - Exit Flashcards
How can an entrepreneur build growth potential?
- ANSOFF MODEL! (market, offer)
ITS FROM THE VIEWPOINT OF THE COMPANY NOT THE MARKET!
- market penetration (old, old)
- Market development (new, old)
- product/services development (old, new
- (unrelated) diversification (new, new)
What/why/when is market development?
Achieve economies of scale of production
Key competence lies with the product
Product is nearing end-of life cycle
New market, existing product
Where do new markets come from (regarding Ansoff model)
• New market segments • New geographical areas o Competitive advantage lies with resources in your home country -> Exporting (low cost, low risk) • Need presence in foreign market o Sales agent • License or franchise • Joint venture (alliances) • Wholly-owned subsidiary (most expensive)
What to do when your resources lay within your own country
export (low risk, low costs)
Need presence in foreign market, what to do?
Can use a sales agent
What to do with market penetration
o Increase sales by penetrating the market already present in
Distribution
Aggressive promotion pricing strategies
Brand loyalty
what/when/why/when product/service development
Product modification
Product expansion
Product extension
Completely new products
What is a bcg matrix? and the stages of the life of an product
Growth share matrix,
- star (growth)
- cash cow (maturity)
- dog (decline/failure)
- question mark/problem child (introduction)
3 factors within the bcg, and what are they for each quadrant?
Star:
- revenue (+++)
- expenditure (high)
- cash flow (neutral)
Cash Cow:
- revenue (++++)
- expenditure (medium)
- cash flow (positive)
Problem Child:
- revenue (+)
- expenditure (high)
- cash flow (negative)
Dog:
- revenue (+)
- expenditure (low)
- cash flow (neutral/or negative)
what/why/how/when (unrelated) diversification?
Gain market dominance in newly emerging markets or industries
To reduce risk in privately owned businesses
What are the 3 parts related to diversification?
• Horizontal integration o Car to bus • Backward vertical integration o Becoming your own component manufacturer • Forward vertical integration o Becoming your own distributor
What is an entrepreneurial exit?
(1) Entrepreneurial exits is a process,
(2) by which the founders of privately held firms leave the firm they created,
(3) thereby removing themselves, in varying degrees, from the primary ownership and decision-making structure of the firm
What are the different exit types?
o Bankruptcy
o Dissolution
o Sell-out
o IPO (initial public offerings)
Importance of exit
o Most significant event in the life of the entrepreneur
o Positive and negative changes for the firm
o May change competitive balance of the industry
o Enhances regional economic development
Drivers of entrepreneurial exit
o Ownership Equity and psychological o Aspiration Lifestyle versus growth o Phases of the entre. Journey conception & gestation Infancy Adolescence Maturity
What are the exit motives of conception & gestation, and what are the exit options?
• Exit motives
o Alternative forces: better opportunities?
o Calculative forces: do I have a good idea?
o Normative forces: What do my family and friends think?
• Exit options:
o Abandon idea
What are the exit strategies, motives and options of the stage infancy?
• Exit strategy:
o Lifestyle vs growth-oriented ventures
o Focus on day-to-day tactics
• Exit motives:
o Alternative forces: better opportunities?
o Calculative forces: do I have a good idea?
o Normative forces: What do my family and friends think?
• Exit options:
o Failure and voluntary disbanding
What are the exit strategies, options, motives of the phase adolescence
• Exit strategy:
o Increasing role of stakeholders and pressure to develop exit strategy
o Psychological ownership
• Exit motives:
o Pressure of stakeholders
o Professional management team
• Exit options:
o Sell-out
o IPO
What are the exit strategies, motives, and options in the phase maturity?
• Exit strategy:
o Mainly lifestyle ventures that have not exited
• Exit motives:
o Desire to harvest
o Need for liquidity
o Life stage of entrepreneur
• Exit options
o Sell-out
o Asset sale
How to prepare yourself for a trade sale
- have motives for trade sale
2. the acquisition process preparation
What are the motives for a trade sale?
Creating an exit for investors or founders
Growing the business
What are the phases in the acquisition process?
- acquisition strategy
- Pre acquisition phase
- transaction phase
- implementation phase
What does the acquisition strategy exist of?
• Motive
o Leverage what they do
o Leverage what they know
• Objectives
What does the pre acquisition phase exist of?
• Search o Aquirer Corporate venture capital Alliances o Target Teaser (anonymous) o Both Intermediaries network • Screen • Select
What does the transitional phase exist of?
• Due diligence is done, complete • Deal closing o Pay options: Cash Stock Contingency payments
What does the implementation phase exist of?
• Integration • Coordination o Should you integrate or coordinate? Acquirer’s motive Does targets have products?
What does the due diligence exist of?
analysis of complete activities of the firm: o Financial review o Expenses o Company milestones o Organizational charts o Intellectual property o Operations o Customer base profile o Percentage of sales from key industry o Sales & marketing summary o Legal issues o Human resources
When to integrate/coordinate?
a: does target have products
b: acquirer’s motive
integration (a: Yes, b: what target knows)
autonomy (a: No, b: What target does)
hybrid (a: Yes, b: what target does)
hybrid (a: no, b: what target knows)
