Exit strategy

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An exit strategy is a means of leaving one's current situation, either after a predetermined objective has been achieved, or as a strategy to mitigate failure. [1] [2] An organisation or individual without an exit strategy may be in a quagmire. At worst, an exit strategy will save face; at best, an exit strategy will deliver an objective worth more than the cost of continuing the execution of a previous plan considered "deemed to fail" by weight of the present situation.

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In warfare

In military strategy, an exit strategy is understood to minimise losses of what military jargon called "blood and treasure" (lives and materiel).

The term was used technically in internal Pentagon critiques of the Vietnam War (cf. President Richard Nixon's promise of Peace With Honor), but remained obscure to the general public until the Battle of Mogadishu, Somalia when the U.S. military involvement in that U.N. peacekeeping operation cost the lives of U.S. troops without a clear objective. Republican critics of President Bill Clinton derided him for having no exit strategy, although he had inherited an active military operation from his predecessor, President George H. W. Bush. The criticism was revived later against the U.S. involvement in the Yugoslav wars, including peacekeeping operations in Bosnia and Kosovo and the Kosovo war against Serbia.

The term has been adopted by critics of U.S. involvement in Afghanistan and especially Iraq. President George W. Bush was said to have no exit strategy to remove troops from Iraq, and critics worried about the number of Coalition soldiers and Iraqi civilians who would suffer injury or death as a result. President Barack Obama did not publicly announce an exit strategy for the troops in Afghanistan.

In public policy

An exit strategy may operate as a means of implementing the termination of a policy or to demonstrate that termination is feasible, for example from joining the Euro. [3]

In business

In entrepreneurship and strategic management an exit strategy or exit plan is a way to transition the ownership of a company to another company (e.g. through a merger or acquisition), to investors (e.g. through an initial public offering) or to the owner's children or family. Other types of exit strategies include management buyouts and employee buyouts. Winding up a company, whether through a bankruptcy or voluntary dissolution, is also an exit strategy. Bringing on board strategic or financial partners may be considered a form of exit, albeit a partial exit, as it may help ensure succession and survival of the business. [4]

Exit strategies are also used to ensure businesses are prepared for the termination of significant contracts or other business relationships. "There are many reasons why contracts come to an end, including non-performance by one or both parties, a significant change in the requirements of either party, or that the contract has run its course. In almost all cases, having a well-developed exit strategy is critical. The strategy is usually developed as the means by which to withdraw from a working relationship with a supplier. It can incorporate the process of returning assets, transferring back key employees and the conditions under which a relationship can terminate, for example, the failure to meet service level agreements, changes in circumstances, and ethical breaches". [5]

Transition companies are professional mergers and acquisitions companies that assist business owners with their exit strategy. Services offered are often referred to as transition management services.

See also

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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. 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. Succession Planning is but one of the many considerations when conducting exit planning. Company owners commonly do not see their company from the standpoint of a potential buyer, and thus, ignore the strategic management of the company.

References

  1. Hawkey, John (2002). Exit Strategy Planning: Grooming Your Business for Sale Or Succession - John Hawkey - Google Books. ISBN   9780566084980 . Retrieved 8 September 2014.
  2. Phillips, Jack (10 August 2010). How to Build a Successful Consulting Practice - Jack Phillips - Google Books. ISBN   9780071491389 . Retrieved 8 September 2014.
  3. Hoover Institute, An Exit Strategy From the Euro, 9 January 2012, accessed 2 March 2016
  4. Nemethy, Les, Business Exit Planning: Options, Value Enhancement, and Transaction Management for Business Owners. John Wiley & Sons, 2011
  5. CIPS Australasia, CIPS Procurement Topics: Exit Strategies Archived 2016-03-07 at the Wayback Machine , accessed 2 March 2016