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CEPA Term Session 4-Questions and Answers 100% Pass
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CEPA Term Session 4-Questions and Answers 100% Pass
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CEPA Term Session 4-Questions and Answers 100% PassWhat are the cons of Intergenerational Transfer as an exit option? Correct Ans-• Family
dynamics
• Illiquid buyers / lack funds
• Lower sale price, inability of successor generation to pay a premium
• Key employee flight risk
• Tradition may outstrip good strategy
• Failure to adequately train the successor generation - impacts on business and personal
well-being
• Customer and vendor acceptance
• Waiting too long to plan - underestimating complexity of this type of transition
What are the pros of selling to employees (ESOP) as an exit option? Correct Ans-i) Business
stays in the 'extended family'
ii) Shares purchased with pre-tax dollars by the ESOP
iii) Taxable gain on the shares sold to the ESOP by the owner may sometimes be deferred
iv) ESOP is an employee benefit
v) May cause employees to think and act like owners
What are the cons of selling to employees (ESOP) as an exit option? Correct Ans-i)
Complicated and expensive
ii) Requires securities registration exemption
, CEPA Term Session 4-Questions and Answers 100% Pass
iii) Company compelled to buy-back shares from departing employees
iv) Generally suitable only for gradual exit over time
What are the pros of selling to a financial third party as an exit option? Correct Ans-•Really
smart, growth-oriented and supportive partners •Two bites at the apple for the seller?
•"Platform" synergies if other companies are part of the buyer's portfolio •Growth capital
(possibly to fund acquisitions as well) •Allows partial exit and participation in future value
gains •Reduces seller's overall financial risk by diversifying assets •Works well with other exit
options, such as a management buyout or ESOP funding
Why should CEPAs Care about all the exit options? Correct Ans-•Empowering owners with
choices •Differentiates the advisor - qualified & well-trained •Avoids the appearance or
perception of bias toward one or just a few options •Helps with "issue spotting" •Organizes
how the inter-disciplinary advisory team is structured •A broad spectrum of options
decreases the transition failure rate
What are the two general categories for private ownership exit options? Correct Ans-
Inside vs Outside
What are the 4 options for "inside" Private Ownership Transition? Correct Ans-
•Intergenerational Transfer
•Management Buyout
•Sell to Existing Partners
•Sell to Employees
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