The various exit strategies that investors may use and the implications for commercialization - Essay Example

The exit strategy of the investors is in line with the objectives of the organization and the plans for future growth (Mayo, 2010). The various methods of liquidating the stakes of the company include issuance of the Initial Public Offerings, Merger and Acquisition, Sell-out of the company and transfer of shares to another family member. The exit strategies of the investors are also influenced by the objectives of commercialization that requires attaining the best price for exit of the investment position.

Exit strategies used by investors The majority of the stakes in an organization are held by the shareholders who have invested in the companies for future growth with an objective of the maximization of wealth. The attraction of investors by the organization depends on the provision of exit strategies provided to them. The exit strategies of the investors provide them with the opportunity to liquidate their investments in the companies in terms of converting their shareholdings into cash amounts.

The exit strategy of the investors falls in the same line with that of the organization which demands a higher market price against the prevailing intrinsic value of the stocks (Butler, 1993). The investors may be institutional investors or venture capitalists or angel investors who own the equity of the business from the time of start up. The investors look for a high return from the investments and an exit strategy over a period of 3 to 7 years. The exit strategies of the investors revolve around the management decisions of issuance of IPO of the company, entering into the process of the mergers and acquisitions, sell out of the company stakes or hand-over of business to another member of the family.

The companies look to issue Initial Public Offering by selling the shares held by the held by stakeholders to the public for trading in the public stock exchange. In the process of issue of shares to the public, the investors would be able to liquidate their position and exit their position of investments (Northcott, 1992). When the investors sell a part of the stake, the investors loose their ownership control over the decisions of the management. In cases where merger and acquisition takes place, the buy out of the company by another larger player would enable the investors to exit their position of shareholdings in the company.

In the process of merger and acquisition, the stocks bought by the acquiring company make provision for the investors of the acquired company to exit their position of investment. In case of sell-out of the company to another player in the industry, the existing investors would be able to cash out their investments in the company. The handover of the management to another family business could also be an exit strategy for the investors in order to cash out their investments. Implications of commercialization The aspect of commercialization has significant implications on the exit strategy of the investors.

The various considerations from the point of view of commercialization are the time of exit for the investors from their position of investment, the target group to which the stakes of the company should be sold and the method of exit preferred by the company. The objective of commercializat