Exit Strategy

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Description of Exit Strategy. Explanation.

 

Definition Exit Strategy. Description.


A Exit Strategy is a strategic withdrawal of a corporation out of a typically declining or not very profitable market, brand, product, product line, or entire company.


Also it can be used to describe the method by which Venture Capitalists or a business owner intends to get out of a business / investment that he or she has created / made in the past. For example via an Initial Public Offering or selling their businesses to individuals or other companies.


Exit Barriers

All the factors that make it difficult for a company to end loss-making business activities. Exit barriers may include the following:

  1. Social factors: required procedures regarding layoffs and the resistance of employees who are in danger of losing their jobs present very important exit barriers.
  2. Strongly specialized assets: the liquidation value of a strongly specialized machine is often significantly lover than the utility value.
  3. Connection of a product to one or more other products: for example through the collective use of means of production (a building or a machine).
  4. Emotional factors: such as attachment to a certain product by the owner or management.
  5. Government support: support for companies in trouble may present an exit barrier.
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Compare with: Harvest Strategy  |  Disaggregation  |  Turnaround Management  |  Spin-Off  |  Divestiture  |  Abandonment Value  |  Liquidation Value  |  Start-up Company  |  Outsourcing  |  Restructuring  |  Downsizing  |  Leveraged Buy-Out  |  Management Buy-Out

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