Exit Strategy for DeVie Luxury Independent living Community An exit strategy is a typical business plan that provides an outline and he processes that a company will make use of when the time for closing its door comes. An exit strategy is very important before the development of a financing strategy. Savvy Seasoned adult through its brand De’vie has an exit strategy as a way of attracting investors into the business. This is because it is very critical for companies to supply an exit plan to the investors so that they may be able to get their money back upon the exit of the company (Peters, 2009).
The company has devised different exit strategies that take into accounts the personal, business and investor goals. The exit strategies for Savvy Seasoned adult include: 1. Paying off its investors- The Company will pay off its investors in a period of five years and then continue business for five years. The amount paid to the investors will depend on the Return on Investment (ROI). That is, the company will look at the rate of return which it has been offering to its investor.
This means that the company will pay $400,000 in five years time plus interest. 2. Sale or liquidation of the company- The Company will evaluate on whether to sale of keep the business after 10 years following the payoff to the investors. This is because the company will get a commercial lease on the company building that will extend over a period of 10 years. As a for profit venture capital, Savvy Seasoned adult will know whether to sell the company as a way of receiving financial returns on their investments.
The liquidation of the company will only take place if the owners decide that is enough or when the company is not performing well (Hawkey, 2002). Corporate divestiture is the most common form of divestiture where a company is sold to independent buyers. After the 10 years, the company may choose to sale the company to financial buyers such as private equity firms who are in search for further development or restructuring of the business or they can sell the company to corporate strategic buyers who often pursue a business because it fits strategically with existing strategy of the entity.
3. Completion of an Initial Public Offering (IPO) where the company will sell its shares on the stock market in order to take out the original investors as well as to raise additional capital. 4. Franchise the company- The Company might also decide to sell its business concepts to others to replicate in order to receive the required amount of cash to pay off its investors. This will help the owners of the company to retain their current management positions and will provide them with an opportunity for growth (Eckermann, 2007).
5. Acquisition or merger- The Company may also decide to sell its company to another exiting company or even join another exiting company. This Merge will help the company to increase its market share as well as the value for its shareholders. References Hawkey J, (2002). Exit Strategy Planning: Grooming Your Business for Sale Or Succession. Gower Publishing, Ltd Peters B, (2009). Early Exits: Exit Strategies for Entrepreneurs and Angel Investors (but Maybe Not Venture Capitalists).
Basil Peters Eckermann M, (2007). Venture Capitalists Exit Strategies under Information Asymmetry: Evidence from the US Venture Capital Market. Springer