Business exit reasons and strategies

Case Interview
New answer on May 11, 2021
4 Answers
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Anonymous A asked on May 08, 2021

Hello everyone, what can be the reasons for a company to exit a market (business segment, country ..) ?

I was thinking about:

- Financial failure (profits declining, low margins, debts ..)

- Operational failure (suppliers problems, customer insatisfaction, poor management..)

- Market uncertainty/conditions (politics, financial crisis, legal issues, new disrupting competitor, mature market ..)

Concerning the exit strategy, I was thinking of:

- M&A

- Going public (IPO)

- Close-down the business

Do you have other ideas?

Thank you so much

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Ian
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replied on May 08, 2021
MBB | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

Hi there,

Your list is pretty good, but I have the following comments:

  1. We could also leave the market because...the market is fandamentally unattractive (shrinking market size, decreasing margins, price wars, substitutes coming in, etc.)
  2. In terms of exit strategy, IPO literally makes no sense!
  3. In addition to being bought out (M&A) nd completely closing the business, you can also pivot into a new market (Look at GM with EV/AV tech)
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Francesco
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replied on May 09, 2021
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Hi there,

You should leave a market if:

  1. It doesn’t allow you to reach the goal of the company or
  2. It allows to reach the goal but more slowly than another option (ie too large opportunity cost). This was the GE mentality - you should be in a market just if you can be #1 or #2 there

As options to leave a market:

  1. Sell to someone else
  2. Shut down the business

Can’t see IPO as an option to exit ;)

Best,

Francesco

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Antonello
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replied on May 09, 2021
McKinsey | MBA professor for consulting interviews

Hi, I confirm IPO should not be considered as an option

Best,
Antonello

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Clara
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replied on May 11, 2021
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

Well done! I would add:

  • Market becoming unnatractive
  • Lack of alignment with company focus

Hope it helps!

Cheers,

Clara

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Ian gave the best answer

Ian

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