CEPA - EXIT OPTIONS ANALYSIS
EXAM QUESTIONS AND ANSWERS
Based on the 2013 EPI State of Owner Readiness Survey, how many business
owners were not familiar with all their transition options? - Answer- Nearly 2/3rds
What is a pro for an intergenerational transfer? - Answer- a) Business legacy
preservation b) Planned c) Lower cost
Which of the following is not an inside exit option? - Answer- Recapitalization
What are the two general categories for private ownership exit options? - Answer-
Inside and Outside
. A business owner you are advising on exit options does not have a family member
or children to transfer the business to. She would like the exit option that will get her
the highest price for the business, more cash up front, and will allow her to walk
away faster. What option do you recommend? - Answer- Third Party Sale
Inside Sale options - Answer- i. Intergenerational transfer ii. Management buyout iii.
Sale to existing partners iv. Sale to employees (ESOP)
Outside Sale options - Answer- i. Sale to third party ii. Recapitalization iii. IPO iv.
Orderly liquidation
When asked, "what best describes how you are planning to transition?" Owner plans
for transition, based on 2013 SOOR: - Answer- i. 35.6% indicated they would
transition via an internal exit option ii. 31.4% indicated they would transition via an
external option iii. 30.9% indicated they were not sure iv. 2% of the sample answered
"other
Intergenerational transfer - Answer- . Transfer of business stock to direct heirs,
usually children. 50% of business owners want to exercise this option - in reality,
only about 30% actually do
Pros of intergenerational transfer - Answer- i. Business legacy preservation ii.
Planned iii. Lower cost iv. More control v. Less disruption vi. High buyer/seller
motivation
Cons of intergenerational transfer - Answer- i. Family dynamics ii. Illiquid buyers /
lack funds iii. Lower sale price iv. Key employee flight risk v. Tradition may outstrip
good strategy vi. Path of least resistance - but not always a path to growth or
success
Management Buyout MBO - Answer- Owner sells all or part of the business to the
company's management team. Management uses the assets of the business to
finance a significant portion of the purchase price
EXAM QUESTIONS AND ANSWERS
Based on the 2013 EPI State of Owner Readiness Survey, how many business
owners were not familiar with all their transition options? - Answer- Nearly 2/3rds
What is a pro for an intergenerational transfer? - Answer- a) Business legacy
preservation b) Planned c) Lower cost
Which of the following is not an inside exit option? - Answer- Recapitalization
What are the two general categories for private ownership exit options? - Answer-
Inside and Outside
. A business owner you are advising on exit options does not have a family member
or children to transfer the business to. She would like the exit option that will get her
the highest price for the business, more cash up front, and will allow her to walk
away faster. What option do you recommend? - Answer- Third Party Sale
Inside Sale options - Answer- i. Intergenerational transfer ii. Management buyout iii.
Sale to existing partners iv. Sale to employees (ESOP)
Outside Sale options - Answer- i. Sale to third party ii. Recapitalization iii. IPO iv.
Orderly liquidation
When asked, "what best describes how you are planning to transition?" Owner plans
for transition, based on 2013 SOOR: - Answer- i. 35.6% indicated they would
transition via an internal exit option ii. 31.4% indicated they would transition via an
external option iii. 30.9% indicated they were not sure iv. 2% of the sample answered
"other
Intergenerational transfer - Answer- . Transfer of business stock to direct heirs,
usually children. 50% of business owners want to exercise this option - in reality,
only about 30% actually do
Pros of intergenerational transfer - Answer- i. Business legacy preservation ii.
Planned iii. Lower cost iv. More control v. Less disruption vi. High buyer/seller
motivation
Cons of intergenerational transfer - Answer- i. Family dynamics ii. Illiquid buyers /
lack funds iii. Lower sale price iv. Key employee flight risk v. Tradition may outstrip
good strategy vi. Path of least resistance - but not always a path to growth or
success
Management Buyout MBO - Answer- Owner sells all or part of the business to the
company's management team. Management uses the assets of the business to
finance a significant portion of the purchase price
