BU121 Lecture Notes - Lecture 11: Fixed Cost, Leveraged Buyout, Operating Cash Flow
Document Summary
Method entrepreneurs and investors use to exit business and reap value of investment. For entrepreneur: personal as well as financial considerations: there are qualitative issues, can"t just focus on quantity. For investor: often commitment to capital will be tied to harvest options: want to know how much, when, and how, purely quantitative, want to convert their investment into more liquid form = liquidity event. Share buyback, royalty buyback, ipo: less than 2% of companies will ever get to the size to get an ipo. Sell the company: people go into business with an eye out for people they can sell it to, most acquisitions should be strategic, strategic acquisition, financial acquisition. Locking into a higher fixed cost to get something that will magnify rewards. Uses debt to finance the acquisition: employee acquisition. Employees know exactly what the goals and visions are and.
