Week 7 - Exit

Question 1

How can an entrepreneur build growth potential?

Answer 1

1. 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)

Question 2

What/why/when is market development?

Answer 2

 Achieve economies of scale of production
 Key competence lies with the product
 Product is nearing end-of life cycle

New market, existing product

Question 3

Where do new markets come from (regarding Ansoff model)

Answer 3

•	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)

Question 4

What to do when your resources lay within your own country

Answer 4

export (low risk, low costs)

Question 5

Need presence in foreign market, what to do?

Answer 5

Can use a sales agent

Question 6

What to do with market penetration

Answer 6

o Increase sales by penetrating the market already present in
 Distribution
 Aggressive promotion pricing strategies
 Brand loyalty

Question 7

what/when/why/when product/service development

Answer 7

 Product modification
 Product expansion
 Product extension
 Completely new products

Question 8

What is a bcg matrix? and the stages of the life of an product

Answer 8

Growth share matrix,

• star (growth)
• cash cow (maturity)
• dog (decline/failure)
• question mark/problem child (introduction)

Question 9

3 factors within the bcg, and what are they for each quadrant?

Answer 9

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)

Question 10

what/why/how/when (unrelated) diversification?

Answer 10

 Gain market dominance in newly emerging markets or industries
 To reduce risk in privately owned businesses

Question 11

What are the 3 parts related to diversification?

Answer 11

•	Horizontal integration
o	Car to bus
•	Backward vertical integration
o	Becoming your own component manufacturer
•	Forward vertical integration
o	Becoming your own distributor

Question 12

What is an entrepreneurial exit?

Answer 12

(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

Question 13

What are the different exit types?

Answer 13

o Bankruptcy
o Dissolution
o Sell-out
o IPO (initial public offerings)

Question 14

Importance of exit

Answer 14

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

Question 15

Drivers of entrepreneurial exit

Answer 15

o	Ownership	
	Equity and psychological
o	Aspiration
	Lifestyle versus growth
o	Phases of the entre. Journey
	conception & gestation
	Infancy
	Adolescence
	Maturity

Question 16

What are the exit motives of conception & gestation, and what are the exit options?

Answer 16

• 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

Question 17

What are the exit strategies, motives and options of the stage infancy?

Answer 17

• 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

Question 18

What are the exit strategies, options, motives of the phase adolescence

Answer 18

• 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

Question 19

What are the exit strategies, motives, and options in the phase maturity?

Answer 19

• 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

Question 20

How to prepare yourself for a trade sale

Answer 20

1. have motives for trade sale

2. the acquisition process preparation

Question 21

What are the motives for a trade sale?

Answer 21

 Creating an exit for investors or founders

 Growing the business

Question 22

What are the phases in the acquisition process?

Answer 22

• acquisition strategy
• Pre acquisition phase
• transaction phase
• implementation phase

Question 23

What does the acquisition strategy exist of?

Answer 23

• Motive
o Leverage what they do
o Leverage what they know
• Objectives

Question 24

What does the pre acquisition phase exist of?

Answer 24

•	Search
o	Aquirer
	Corporate venture capital
	Alliances
o	Target
	Teaser (anonymous)
o	Both
	Intermediaries
	network
•	Screen
•	Select

Question 25

What does the transitional phase exist of?

Answer 25

•	Due diligence is done, complete 
•	Deal closing
o	Pay options:
	Cash
	Stock
	Contingency payments

Question 26

What does the implementation phase exist of?

Answer 26

•	Integration
•	Coordination
o	Should you integrate or coordinate?
	Acquirer’s motive
	Does targets have products?

Question 27

What does the due diligence exist of?

Answer 27

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

Question 28

When to integrate/coordinate?

Answer 28

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)