1. Begin With the End in Mind
A little something about exits
Stephen Forte
@worksonmypc
Weibo: SteveForte

2. Warning!
Don’t start a company in order to get rich
Your chances of success are very, very low!
That said, if you want to learn about exits, start
here ;)

3. Definitions
Legal term: change of control
Someone has taken legal ownership of your
company
Usually when someone acquires your company
Legal term: liquidity event
Someone invests in your company
IPO

4. Type of Exits
Acquisition
Asset v Share
Merger
Reverse Merger
IPO

5. Motives for an Acquisitions (buyer)
Strategic Acquisition
Expansionary/Entering new Geography
Integrative/Supply Chain

6. Ways to price an acquisition
Public-private arbitrage
DCF/NPV analysis
Cost savings

7. You sold your company, so you’re
rich, right?
Cash up front
Cash + equity up front
Installments (cash/equity)
Earn-out (cash/equity)
EBITA based
Any performance metrics

8. When to Sell?
Newco/pre-revenue
Usually an earn out (unless strategic)
Dependent on the owner’s ability to execute
Early revenue/no profits
Will usually bring out the DCF analysis
Usually the Lowest valuation
Profitable/mature
Public-private arbitrage
Best Valuation
Post-mature

9. Stages of an exit
Negotiation leads to an offer
Letter of Intent (LOI)
Due Diligence (DD)
Legal Documents (“Docs”)
Re-negotiation of the LOI!
Close

10. How Investors Effect an Exit
Investor may push to sell too early
VC’s usually have warrants against your
company
Your ownership is diluted
Your company will be *much* better structured
for an exit
Investor will be dispassionate at the exit (you
will be emotional)

11. Q&A