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'''Exit planning''' is the preparation for the exit of an [[entrepreneur]] from his company to maximize the [[enterprise value]] of the company in a [[mergers and acquisitions]] transaction and thus his [[shareholder value]], although other non-financial objectives may be pursued including the transition of the company to the next generation, sale to employees or management, or other altruistic, non-financial objectives.<ref>Kupferman, Martin. "Savvy exit strategies for mid-sized companies." Journal of Corporate Accounting & Finance 14.2 (2003): 9-12.</ref> Exit planning differs from [[succession planning]] in that the later is a sub-component of exit planning, and refers to the hiring, training and retention of a successor President/CEO of the company in a planned manner.<ref>Sharma, Pramodita, James J. Chrisman, and Jess H. Chua. "Succession planning as planned behavior: Some empirical results." Family Business Review 16.1 (2004): 1-15.</ref> Succession Planning is but one of the many considerations when conducting exit planning.<ref>Hawkey, John. Exit Strategy Planning: Grooming your business for sale or succession. Gower Publishing Company, 2002.</ref> Company owners commonly do not see their company from the standpoint of a potential buyer, and thus, ignore the strategic management of the company.<ref>https://books.google.com/books?hl=en&lr=&id=Xoq_4e1qleUC&oi=fnd&pg=PA127&dq=preparing+a+company+for+sale+exit+planning&ots=vkbbbspL2G&sig=fUcLLX84fv1prR8DY_-Nt37OIKI#v=onepage&q=preparing%20a%20company%20for%20sale%20exit%20planning&f=false | Kuhn, Robert Lawrence. "Building Value into the Entrepreneurial Company." Leadership and Entrepreneurship: Personal and Organizational Development in Entrepreneurial Ventures (1996): 127.</ref>

However, other authors define exit planning in a broader sense. For example, Business Exit Planning is the process of explicitly defining exit-related objectives for the owner(s) of a business, followed by the design of a comprehensive strategy and road map that take into account all personal, business, financial, legal, and taxation aspects of achieving those objectives, usually in the context of planning the leadership succession and continuity of a business. Objectives may include maximizing (or setting a goal for) proceeds, minimizing risk, closing a Transaction quickly, or selecting an investor that will ensure that the business prospers. The strategy should also take into account contingencies such as illness or death.<ref>Nemethy, Les, Business Exit Planning: Options, Value Enhancement, and Transaction Management for Business Owners. John Wiley & Sons, 2011</ref>

Company owners commonly do not see their company from the standpoint of a potential buyer, and thus, ignore the strategic management of the company. To achieve their desired outcomes, business owners often focus their attention on exit planning from the beginning of the investment, in order to prepare adequately for trade and financial sales, make effective use of the buy back option, market their businesses more widely for sale, use intermediaries and get the support of management<ref>http://griequity.astraea.net/resources/InvestmentIndustry/vc/evca/BetterExits.pdf | Wall, John, and Julian Smith. "Better exits." The Journal of Private Equity 1.2 (1997): 31-43.</ref> Significant value is lost due to an absence of or inadequate exit planning. Roughly 30% of businesses will be transferred to family member in some manner, 18% intend to sell to its employees, and many will simply be closed.<ref>Holaday, David W. "Exit Plans for Financed Life Insurance: Preparing to Cross That Bridger before Coming to It." J. Pract. Est. Plan. 8 (2006): 15.</ref> Up to one-third of businesses that are closed were successful at their termination<ref>http://cmapspublic.ihmc.us/rid%3D1227459615945_1100677163_14681/Preparing%20for%20Organizational%20Death.pdf | Marks, Mitchell Lee, and Ronny Vansteenkiste. "Preparing for organizational death: Proactive HR engagement in an organizational transition." Human Resource Management 47.4 (2008): 809-827.</ref>

The three sources of enterprise value in a company are firstly the value of its tangible assets, and secondly the value of its [[intellectual capital]] (intangible assets), which consist of [[human capital]], [[relational capital]], and [[structural capital]] (including is subcomponents [[organizational capital]], innovation capital and process capital. Most of a [[middle-market company]]'s and [[Middle-market company|lower middle market]] company's value is derived from its relational capital, specifically, its customer relationships.<ref>Relational Capital: Strategic Advantage for Small-and-Medium-Sized Enterprises (SMEs) Negotiation and Collaboration, Theresa M. Welbourne, Manuela Pardo del Val, 2008</ref><ref>Lervik, Elisabeth. "Relational Capital: A study on its importance, quantification and its impact on business sectors and markets."</ref> [[Small to medium enterprises|SMEs]], also referred to as middle market companies, create innovation capital (part of structural capital).<ref>http://www.smeal.psu.edu/cmtoc/cmtoc/research/nistnpd.pdf</ref>

Most small-to-medium-sized businesses use a [[boutique investment bank]] to market their company in a mergers and acquisitions transaction to potential buyers. Some boutique investment banks also offer exit planning preparation, while certain consulting firms offer one or more of the services needed to conduct exit planning, such as [[human resources]], in connection with succession planning.

[[Private Equity|Private Equity Groups]] are common acquirers of [[Middle-market company|middle market]] businesses, whether as [[Platform Company|Platform companies]] or add-on or tack-on acquisitions.

In addition to business aspects, personal considerations need to be taken into consideration, including considerations about estate taxes, capital gains taxes, or other taxes.<ref>{{cite web |url=http://www.fambusiness.org/article_estatetax.html |title=Archived copy |accessdate=2014-01-07 |deadurl=yes |archiveurl=https://web.archive.org/web/20110831123200/http://www.fambusiness.org/article_estatetax.html |archivedate=2011-08-31 |df= }}</ref>

==References==

{{reflist}}

[[Category:Business planning]]
[[Category:Capital (economics)]]
[[Category:Corporate finance]]
[[Category:Investment banking]]
[[Category:Mergers and acquisitions]]

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