The Baseline Exit

Overview

A Baseline Exit is the sale of a company at the minimum acceptable value as agreed upon by its owners. It is the minimum threshold where an exit is preferable as compared to not selling at all.

This exit type may not be A first-class exit, but it does mean that after it has completed, you can still walk away without second-guessing whether it was the right decision.

Using the steps and information below is a good starting point to help triangulate, then align on, the requirements for a Baseline Exit.

Understanding your Baseline Exit

To know what your Baseline Exit could look like, it helps to understand:

  • What’s your minimum acceptable number?
  • What are your “must have” requirements (as compared to “nice to have”)?
  • What are your other strategic choices (alternatives to an exit) and Risks: acceptable vs unacceptable to consider?

Minimum acceptable number

This can vary depending on the circumstances, but a good starting point is:

  1. Know your stages of maturity
  2. Consider how others would view your company
  3. Consider the value to shareholders of a Baseline Exit, compared to other strategic options:
    • Calculate the Intrinsic value: the Net present value of future cash flows being generated by the business, for the expected timeframe, based on the business’s expected activities.
    • How do current market multiples for various exit paths compare to your intrinsic value? Is it likely the market price will be a reasonable premium over the expected intrinsic value?

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