In the final chapters of the book, we talk about harvesting. After readying the chapter, it is basically the exit plan. There are five positive methods and two negative methods. Andrew Blair states, “The exit has to be engineered as carefully as the deal itself” (pg. 289).
Walking Harvest is where the company distributes case directly to the investors regularly and could take time for that to happen. Once it does, it is normally a steady stream of income.
Partial sale takes place when the investor is ready to exit the deal. Here the investor will either sale the shares to management with cash or a buy-out-agreement or sell to another investment company that specializes in buying minority positions in small and medium sized companies.
Initial public offering is investors who aren’t waiting for the public offering, you are waiting for the point at which the company has created the most value (Daryl Wash pg. 294). Here the company sells a percentage of their shares and makes it easier for the company to raise capital, basically getting the business to where it has the most value.
Financial Sale is purchasing the company based on its current and expected cash flow. If you have cash flow, this is a great deal.
Strategic sale, Bert Twaalfhoven say that the best returns come from strategic sales (pg. 297). They are usually looking for value beyond the cash flow. The return for the investor could range from 10x to 40x.
Chapter 11 would not be a good way to exit, bankruptcy. This is an option where you can reorganize, but most if not all of your equity holders are gone or have reduced their shares considerably. This option will save you from filing chapter 7 and give you another chance.
Chapter 7 is total annihilation, you have lost everything. Not the way to exit
I said it earlier in a discussion that there is so much that goes into investing. After reading this book, it was clear how much I do not know. I think it is so important to understand and or surround yourself with those that do understand investing. I still feel that in the end, it is the relationships that matter the most. They are the ones that are going to be honest with you and have your best interest at heart. Network, have a good lawyer, financial advisor, and friends that will look out for you.
Winning Angels: the Seven Fundamentals of Early-Stage Investing. Financial Times Prentice Hall, 2001.