12 Exit Strategies for Business

No business owner ever starts a business with the goal of ending it.

This is why, for most entrepreneurs, thinking about exit strategies can feel like a taboo subject.

However, an exit strategy for business makes sure your business moves forward in a way that is aligned with the vision you had.

In some cases, selling or winding a business up can be the best option. 

In this guide, we’ll break down the different exit strategies, guiding you with:

• assessing which strategies align with your goals
• making a confident decision should the time comes to exit from your business

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We’ve created a detailed checklist for planning and executing a business exit strategy. 

This covers key steps, from assessing your current situation to post-exit considerations.

Using this guide will help ensure you’re considering all the important aspects of the exit process.

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What is an exit strategy for business?

A business exit strategy is a plan for when a business owner sells their ownership to other investors or another company. This process involves selling their ownership stake, either partially or entirely. 

It results in the owner no longer holding a majority stake in the business. The ownership can be transferred to a family member, sold to a competitor, or even acquired by a larger company. 

An exit can also occur through an IPO or other forms of equity sales.

Why is having an exit strategy for business important even when you’re still running the business?

Having a well-defined exit strategy, even while the business is still operating, helps preserve the legacy created by the current business owners. This ensures the company’s survival and growth. 

Unfortunately, nearly half (48%) of UK business owners lack an exit plan, yet 71% are confident about creating liquidity. 

Without a proper business exit strategy however, it’s difficult to truly maximise outcomes.

Here are several reasons why having a business exit plan is important:

• Command a higher price and guarantee business survival. 
• Protect the legacy created. 
• Avoid financial pitfalls and ensure a smooth handover.
• Prevent selling to a dishonest buyer or an uncompetitive company.
• Attract more investors and partners.

What are the exit strategies for businesses?

Choosing the wrong exit plan can result in you losing your legacy, financial setbacks, or even unwanted legal issues.

That’s why it is important to carefully evaluate and select the right exit strategy to protect your interests and ensure a better transition.

Below are the top exit strategies for businesses:

1. Merger and Acquisition (M&A)

As per a recent report, acquisitions made up 96% of business exits.

Mergers and Acquisitions (M&As) involve transferring ownership, or consolidating with another entity through direct absorption, hostile takeovers, tender offers, or mergers. 

In the UK, M&As must comply with antitrust, financial transparency, and market abuse laws. For instance, The Enterprise Act 2002 allows competitive mergers but blocks monopolies, requiring investigations and divestments. 

Pros:

• Business growth and customer reach.
• Retained ownership and involvement in management.
• Operational synergies and cost savings.
• Risk diversification.
• Tax benefits, competitive positioning, and talent access.

Cons:

• High legal and regulatory costs. 
• Potential loss of control.
• Delays due to legal scrutiny and investigation.
• Risk of exposing sensitive information.

Suitable for: M&A suits owners looking for growth, strategic change, and a profitable exit by transferring or joining with another company.

At Mergers Acquisitions UK, we provide exactly that! Our expertise lies in providing customised solutions that align perfectly with your business situation. We connect you with larger organisations, making sure your financial goals and strategic growth are at the forefront. 

Reach out today and discover how our M&A consulting services can help you with the transition!

2. Selling to a partner or investor

This exit strategy for business involves selling your business to an existing partner or an investor. This is commonly known as ‘friendly buyer’ sales due to the buyer’s familiarity with the owner.

Most importantly, business owners need to be mindful of TUPE regulations for employee rights.

Pros:

• Business Asset Disposal Relief (BADR) reduces Capital Gains Tax to 10% on eligible gains. 
• You can enjoy continued business success.
• Professional valuation can reduce undervaluation.
• Continued involvement as a consultant or retain a minority stake.
• Shorter sale process.
• Maintains company legacy, values, and culture.

Cons:

• Risk of undervaluation and conflicts due to personal relationships.
• Increased legal and administrative complexity (e.g., TUPE compliance).
• Additional compliance steps, including notifying HMRC and filing tax returns.

Suitable for: SMEs with multiple stakeholders and strong partner or investor relationships. It’s ideal for those wanting to see their business in familiar hands while potentially retaining some involvement. 

3. Family succession

Family succession means passing down ownership of a family business to a direct family member or relative. This ensures that the business remains within the family, preserving its legacy. 

Unfortunately, only around 30% of UK family businesses transition successfully to the next generation, with only 12% from the second to the third generation. 

Hence, it’s important to clearly weigh the pros and cons before going ahead with this exit strategy.

Pros:

• Business Property Relief (BPR) can provide 50 to 100% relief on Inheritance Tax. 
• Keeps the business within the family.
• Smoother transitions as family members already understand the business.

Cons:

• There can be a lack of shared vision among family members.
• Insufficient leadership skills in the next generation can reduce business growth and survival.
• The transfer can trigger Capital Gains Tax on any increase in the business’s value since acquisition.
• Personal relationships or conflicts may complicate the family succession process. 

Suitable for: Business owners with strong family relationships, a well-trained next generation, and a shared, motivating vision for the business’s future. 

4. Acquihire

Acquihire is an exit strategy where the business is acquired by a larger organisation solely for its talent, rather than its assets. The employees are then integrated into the acquiring organisation. 

The buyer’s main aim is to leverage the skills and talent of the team, while the smaller business might be shut down and its products phased out. 

These are especially common in the tech industry, which has a high demand for innovative talent. 

Pros: 

• Stronger negotiation terms of the acquisition.
• Stable employment for the existing staff.
• Employees are protected under TUPE.
• Lower legal risks for the buyer as employee terms are predefined. 
• Quick exit strategy.

Cons: 

• Difficult to find an acquihire buyer. 
• Products or services may be discontinued. 
• Culture mismatch between companies.
• Legal liabilities from unresolved employee disputes. 
• Loss of business identity and legacy.

Suitable for: Businesses with valuable talent but declining products or services. Ideal for owners looking for a quick exit while ensuring employee job security.

5. Management and Employee Buyout (MEBO)

Employee ownership is one of the fastest growing business models in the United Kingdom. 

Management and employee buyout is where the business is sold to its current management team and/or employees. This team takes ownership of the company, allowing business continuity. 

Pros:

• The Enterprise Management Incentives (EMI) provides tax advantages for management and employees acquiring shares.
• An existing team who already understands the business, hence reducing culture shock.
• Clients are reassured with the continuity of the current team.
• Employee Ownership Trusts (EOTs) provide tax exemptions for employee ownership.
• Continuation of company vision and legacy.

Cons:

• Employees and management may lack experience for full ownership. 
• Financial strain can lead to cash flow issues. 
• Risk of internal disagreements.
• Reliance on external financiers may cause financial instability.
• Disputes over existing contracts. 

Suitable for: This exit strategy is suitable for business owners who want to keep the company within well-trusted and reliable hands. 

6. Initial Public Offering (IPO)

An IPO (Initial Public Offering) is where a private company offers its shares to the public for the first time. It’s a popular exit strategy for investors as it allows them to cash out on their investment. 

As reported, nearly 4% of high-growth companies have been through IPOs since 2013. This is a positive number considering the overall trend towards acquisitions. 

Pros:

• Financial Conduct Authority’s regulations govern the IPO process and attract more companies to domestic markets.
• Increases the valuation of the company.
• Allows easy buying and selling of investor holdings.
• Attracts new customers, partners, and talent.
• Provides lucrative exit opportunities for founders. 

Cons:

• More regulatory scrutiny and compliance requirements.
• Pressure from investors, shareholders, and the market.
• Costly process. 
• Risk of overvaluation and undervaluation.
• Insider trading restrictions.
• Vulnerable to hostile takeovers. 

Suitable for: Established, high-growth companies that are ready to meet the regulatory requirements and take the leap into public markets.

7. Liquidation

Liquidation as an exit strategy is on a rise, with the UK seeing the highest company insolvency rates in 2022!

This is the process of winding up a business by selling its assets and paying off any liabilities when the company is insolvent. Shareholders or directors initiate it, and any remaining funds are distributed to shareholders. 

Pros:

• Avoids chaos and disputes by proper winding up.
• Maximises value from selling company assets.
• Offers a fresh start to business owners.
• Liquidation under the Insolvency Act 1986 offers legal protection to stakeholders.

Cons:

• May result in asset valuation less than their worth.
• Leaves some financial obligations unresolved.
• There are restrictions on starting a new business in the same sector for a period of time.
• Affects creditworthiness and reputation. 

Suitable for: Businesses that are insolvent or have reached the end of their operational life. It is appropriate for those looking to resolve debts and officially end their business obligations.

8. Bankruptcy

Bankruptcy is the legal process of liquidating a sole trader business’ assets and freeing up its financial debts. It’s mostly a last resort exit strategy, and is considered when a business is facing financial struggles. 

Companies that are insolvent will be under legal administration or liquidation if they are unable to pay the money they owe. Administration means you don’t have to pay all the debts in full, but your company will still be shut down.

This is usually less preferred over other exit strategies as it offers a less profitable outcome. 

Pros:

• Business is freed up of debts and financial responsibilities. 
• Removes burden and reduces worries about lawsuits.
• The company is protected from legal actions from creditors.
• Creditors cannot wind up your company while it’s under legal administration.

Cons:

• Owners may struggle to borrow credit in the future.
• Provides little value to the business. 
• Loss of assets.
• A time-consuming process.

Suitable for: Individuals who have huge debts and cannot pay them. Works for those who are looking for a legal way to address their insolvency. 

9. Trade sale

A trade sale is a popular exit strategy where you sell your business to another business. The trade acquirer or buyer is usually a competitor or someone who operates in the same sector or industry. This buyer will acquire your assets, intellectual property, and even customer base. 

Pros:

• Higher sales value if the acquirer identifies the strategic value in the purchase. 
• Better growth potential with access to new distribution channels, technologies, and markets.
• The burden of future legal or financial challenges shift to the acquiring company.
• Option to completely exit the business, or take a reduced but still important role. 
• Quicker due diligence process before the sale.

Cons:

• Negative short-term effects during the sale in terms of operations and customer service.
• Potential impact on employee morale, attendance, and performance.
• Chances of big changes in the original vision, values, and business practices.
• Customers may not like the trade buyer. 
• Impact on company valuation depending on market perception.
• Potential leaking of sensitive information if the sale doesn’t go through.

Suitable for: Business owners who want to accelerate growth while wanting to either completely exit or play a minor role. Suitable for those who are also open to changes in business vision and operations.

10. Acquisition by private equity

Here, you sell your business to a private equity firm. They buy a majority or full stake in the business to improve its performance and value over time. 

There has been some decline in private equity deals in 2024 compared to 2023. However, when compared to pre-pandemic activity, the mid-market deals reflects a 25% increase. 

This can be a good strategy based on a few factors:

Pros:

• Capital and other growth initiatives. 
• Improved business operation and performance. 
• Less disruption to customer base, business, and employees. 
• Chance of a second payout at a higher valuation in 3-7 years.
• Good option for family successions and management buyouts.

Cons:

• Pressure on achieving quick returns.
• Aggressive growth strategies unaligned with the original vision. 
• Alteration of company values and long-term goals. 
• Affect on employee morale. 
• Conflicts between the firm and the management. 

Suitable for: It works best for those comfortable with reduced control in exchange for business growth.

11. Winding down the business

This is a permanent exit strategy where you sell all of your company’s assets before shutting it down. It can also be known as dissolution or liquidation. 

Business owners must apply to have a company removed from the Companies Register. There are also certain eligibility criteria a limited company must meet before winding up. 

This option also applies to insolvent companies, and winding up of the business can be forced by creditors or HMRC. It may also lead to a winding-up order. 

Pros:

• You can officially close the business and meet all legal obligations.
• Once the winding-up order is in place, any legal actions from the creditors are halted. 
• Minimises legal and operational burdens.

Cons:

• If you miss winding up, you may owe penalties and legal suits. 
• Risk of personal liabilities in case of misconduct, wrongful trading, or breach of duties.
• Lower returns for shareholders. 
• Claims for unpaid wages, holiday pay, or other payments. 

Suitable for: Companies that have exhausted all other business recovery options. It benefits those who want protection from creditors and relief from financial liabilities. 

Selling to a target buyer

Selling your business to a target buyer means selling your business to a specific individual, investor, or a company. This buyer has a strategic interest in acquiring your business. 

Unlike a trade sale, a target buyer may come from outside your sector, and can have broader investment goals.

Pros:

• Offers more flexible terms, such as continued involvement in the business.
• Less risk of losing your company’s identity or culture after the sale.
• This broad pool of target buyers can include private equity firms, companies from other industries, and individual investors. 

Cons:

• Longer sale process as the target buyer may be unfamiliar with your industry.
• Less chance of operational synergies and growth potential.
• Challenges in maintaining the culture or operations of your business. 
• Your business can be sold off again in the future. 

Suitable for: Owners that want high valuations and flexibility but do not want to hand over the business to a direct competitor. 

12. Legacy transfer

In this exit strategy, you pass on the business’s values, mission, and legacy to continue business operations. This can include transferring ownership to non-family members or community organisations. 

The focus is on continuing the business legacy rather than just the ownership.

Pros:

• Business mission and impact continues even after the transfer of ownership.
• IHT (Inheritance Tax) reduces charges by up to 100% if you qualify for business asset relief.
• Access to a wide range of successors. 
• Fulfils the owner’s vision of leaving a lasting impact. 

Cons:

• Successors may not completely align with the original business values. 
• Founders may have less control over the business’s future operations.
• Employees and stakeholders may resist the changes. 

Suitable for: Legacy transfer is ideal for founders who want to retain their legacy and the company’s core values. 

What is the best exit plan for businesses?

No two businesses have the same finances and needs. 

So, if you’re looking for business growth after exit, consider a strategic sale to a larger company, or a leveraged buyout by a private equity firm. 

However, if you want to have some control, equity investments or a partial sale may be more suitable. Always make sure that the exit strategy meets your company’s current situation.

Mergers Acquisitions UK guides you through this process. We take into account business and stakeholder needs before recommending the best plan. Contact us today for expert consultation!

Should I sell my business?

This can be a tough question for any business owner. If you make the wrong choice, it might become a decision you’ll regret.

Consider these questions:

• Is your business currently profitable?
• Do you feel burnt out from running the business?
• Can your business handle upcoming big market trends? 
• Do you have a proper plan after the sale?
• Does the current market value align with your business worth? 

If you do decide to sell, make sure you’re getting a value equivalent to at least 3-5 years of profit. If not, you can also explore other exit strategies that better suit your situation.

Get expert help in planning your business exit strategy with Mergers Acquisitions UK

Sometimes, it’s best to get expert help if your business situation is too complicated. You might need customised exit strategies to get the most out of your business value.

At Mergers Acquisitions UK, we’re here to help you with these decisions. We offer personalised exit strategies that are tailored to your goals and priorities. 

We connect you with larger organisations, help with business valuations, leveraged buyouts, and equity investments.

Whether you’re looking to transition with a specific approach, or just need expert advice on exit planning, we’re here to support you. Contact us today to find out what suits you best!

FAQs

1. What is an exit strategy in business?

An exit strategy in business is a plan for transferring ownership by selling part or all of a business. It includes options like mergers, acquisitions, IPOs, or family succession. Exit strategies help owners secure financial returns and ensure smooth transitions when stepping away from their business.

2. When should I start planning my business exit strategy?

Start planning your business exit strategy early—ideally during the startup or growth phase. Early planning ensures alignment with long-term goals, maximizes business value, and prepares you for unexpected opportunities or challenges in the future.

3. What is the most common business exit strategy in the UK?

The most common business exit strategy in the UK is acquisition. Acquisitions account for around 96% of exits, allowing owners to sell their business to larger firms, competitors, or investors, often for strategic growth and capital gain.

4. What’s the difference between liquidation and winding up a business?

The main difference between liquidation and winding up is that liquidation refers to selling a company’s assets to pay off debts, while winding up is the broader legal process of closing a company, which may or may not involve liquidation.

5. Can I sell my business without losing complete control?

Yes, you can sell your business without losing complete control by opting for a partial sale, selling to a partner or investor, or retaining a minority stake post-sale. These strategies allow ongoing influence while gaining liquidity.

6. Is family succession still a viable exit strategy in the UK?

Family succession remains a viable exit strategy in the UK, especially when the next generation is trained and aligned with the business vision. However, only 30% of family businesses successfully transition, making planning essential.

7. What taxes should I consider when exiting a business?

When exiting a business, consider taxes like Capital Gains Tax, Business Asset Disposal Relief (BADR), and Inheritance Tax. These taxes affect how much you retain from the sale or transfer, depending on the structure and timing of the exit.

8. What if I don’t have a buyer yet—can I still plan an exit?

Yes, you can still plan an exit without a buyer by preparing documentation, improving business valuation, and exploring strategies like MEBOs or legacy transfers. Early preparation attracts future buyers and gives you flexibility.

9. How does a Management and Employee Buyout (MEBO) work?

A Management and Employee Buyout (MEBO) works by selling the business to existing managers or staff. They use financing tools or trusts like EMI or EOT to gain ownership, maintain continuity, and preserve the company culture.

10. What is the difference between a trade sale and a target buyer sale?

The main difference between a trade sale and a target buyer sale is that a trade sale involves selling to an industry competitor, while a target buyer sale involves selling to individuals or firms from outside the sector with broader investment goals