1. 8.Growth and Exit routes l New markets: horizontal and vertical expansion l Problems of growth; second system effects l Communication l Exit routes: acquisition, floatation, MBO or liquidation. l Places to look for new enterprises l Conclusion: now you do it!

2. New markets l Horizontal – Similar products or services – New Customers Geographical/Export New application area New pricing l Vertical – New products or services – Similar customers New model Vertical integration

3. Problems of growth l Communication l Control and Monitoring l Structural change; different skills, people l Formalisation l Cash l Second system effects

4. Communication l Formal channels l Charters l Newsletters l Company meetings and informal events l Needs conscious effort: company culture

5. Management structures l Groups and sub-groups l Charters l Reporting structures

6. Exit routes l Acquisition – Trade sale l Floatation – Sell to the public l MBO – Sell to the staff l Liquidation – Sell the assets

7. Acquisition l Natural process – Wildflower model – Forced sale l Marriage Doesn’t happen quickly – Courtship Selling the company as a product Pre-nuptial relationship – Distributor/customer – JV – Competitor – Tying the knot Due diligence – Clergy Lawyers. Bankers, accountants M&A – Honeymoon Learning to live together Culture clash Rationalisations Lock-ins

8. How much is it worth? Valuation l Asset value l NPV of profitability l DCF l Probabilistic methods – Matrix – Black Scholes l Paper vs Cash l Lock-in periods

9. Floatation l Sale of shares to the public – Primary market – Highly regulated Potential for fraud Expensive – about £1M minimum Get advise! – Underwriter l Admittance to an exchange Listing: admitted to the Official List (UK: LSE) – Public trade shares between each other – Secondary market – Usually immediately following primary market – Market maker l Primarily for raising capital – £5-£10m – Valuation for the company – Capital raising – Exit for founders and investors Lock-in

10. Management Buy-out l MBO – Buy-out Variants l Easier to fund – Existing cash flow, staff, customers etc – Easier to value l Mature company – New blood

11. Liquidation l Voluntary – Stop trading – Asset sale Not usually as valuable as going concern Except for Asset Stripping opportunities – Distribute proceeds l Compulsory – e.g failing to pay the taxman – Bankruptcy Illegal to trade if insolvent Receiver and Directors accountable to Creditors (not shareholders) Half-way houses: – Bankruptcy (insolvency) need not force liquidation – Administration (US Chapter 11) – Creditors arrangement – talk to them Bank guarantees – Arrangement – Talk to them EARLY

12. Managing Traumatic Change Exits and M&A are traumatic times within the company. Change counsellors recognise four stages: l Denial – Need information: who, what, when l Anger – Needs sympathetic hearing – Safe environment l Resignation – Needs information and planning – Small steps, quick wins l Acceptance

13. Conclusion l Building the future – Social Responsibility l Generation of Wealth l Generation of employment l Now you do it!