CIMA F3 discusses exit strategies for owner-managed businesses under Business Valuation, Mergers and Acquisitions, and Private Equity. A key principle is that an appropriate exit route must align with the owners’ objectives, particularly the time horizon, desire for full value realisation, and the size and structure of the business.
In this scenario, Company AB is a medium-sized, owner-managed private company, with two founders who each control divisions and wish to realise the full value of their investment within 12 months. This tight timeframe significantly narrows the range of feasible exit strategies.
Option B – Management Buyout (MBO) is likely to be acceptable. CIMA F3 highlights that MBOs are common exit routes for founder-owned businesses where management has strong operational knowledge and where continuity of the business is important. Given that some employees are highly paid and critical to profitability, an MBO can help retain key staff while allowing the founders to exit fully, usually with private equity support. This route is realistic within a 12-month timeframe.
Option C – Sale to a larger competitor is also highly appropriate. F3 guidance explains that strategic buyers often pay a control premium because they can extract synergies such as economies of scale, elimination of duplicate functions, and enhanced market power. A trade sale is one of the fastest ways to realise full value and is commonly recommended where owners want a complete exit in a short period.
The other options are less suitable:
A (IPO) is unlikely due to high cost, regulatory burden, and long preparation time, making it unrealistic within 12 months.
D (Private equity earn-out) delays full value realisation and conflicts with the owners’ desire for a clean exit.
E (Spin-off/demerger) does not provide liquidity or an exit for the owners.
