Hi there,
I struggle to spot a staged exit strategy among a population of different cases. Theory tells ms that :
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A staged exit strategy has at least “two specific liquidity events” (so how we define a specific liquidity event? CF ? Tax event?)
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Usually ESOP and Leveraged Recap are examples of staged exit strategies.
More specifically can you help me to characterise the below in the above context please (STAGED EXIT STRATEGY) ?
"Strategy 1: A private equity firm can arrange to leverage MTL (company in question), paying the current sharehoder 40% of his estimated value of MTL, in cash up front and rolling the remaining 60% of the value into new shares that pay no dividends. The current shareholder will stay on as president for five years, during which time he will help transition leadership to a new team. After five years, he will sell or monetize the remaining ownership.
Strategy 2: A small but rapidly growing publicly traded building materials company is willing to acquire 100% ownership and pay the current sharehoder $7 million in cash up front and employee stock options that he can exercise after two years and that expire in five years. The public company is too small to support publicly traded stock options. Should the public company’s stock rise, the current sharehoder can exercise his employee stock options, which will be taxed as ordinary income. To protect the value of his appreciated stock while participating in further upside potential, he can purchase long-term protective put options on an industry ETF that closely tracks the building materials industry. If the public company’s stock subsequently drops along with the industry, he can sell the puts."
Any additional examples to bring some light on the top of a clear guideline would definitely help.
thanks in advance