Making the hard decision to exit a business is one of the most consequential moves an owner can make. In 2025, shifting market dynamics, tighter capital conditions, and a recalibrated private equity environment are reshaping how and when owners can step away.
Factors such as fewer IPOs, increased private deal activity, and new tax considerations have made the exit conversation more relevant than ever.
Having a firm understanding of the range of available paths out there, each with its own tradeoffs in timing, valuation, tax impact, and complexity, can help business owners prepare with clarity and confidence.
Common Exit Routes & What To Expect
Each exit path has different expectations around timing, valuation, deal complexity, and tax implications. Owners must weigh these differences carefully when mapping their next steps.
Strategic Sales
Strategic sales often appeal to sellers aiming for a full cash-out and maximum valuation. These deals involve competitors or industry consolidators and usually deliver 100% of proceeds at closing, sometimes with an earn-out based on future performance. Sellers should prepare for a detailed due diligence process and possible cultural alignment issues. In 2023, in the lower-middle market, strategic buyers paid an average of 6.8× EBITDA.
Private Equity
Private equity offers another avenue, ranging from full buyouts to minority recapitalizations or rollovers into continuation funds.
These deals tend to close faster than IPOs and often allow owners to keep a stake, offering upside in a future sale.
Sellers typically go through several weeks of financial diligence before signing a letter of intent, and valuations vary, usually falling between 6× and 10× EBITDA depending on the company profile.
Initial Public Offerings (IPOs)
Initial Public Offerings remain a high-profile option but are rarely practical for smaller companies. They require significant preparation, including SEC compliance and underwriter involvement, and liquidity is staged over time. Costs can be steep, and current market conditions make this route less attractive than in prior years.
Management Buyouts
Management buyouts place the business in the hands of the existing leadership team, which often combines senior debt, seller financing, and rollover equity. While appealing from a continuity standpoint, they can be difficult to fund unless managers have access to significant capital. The resulting debt load can also weigh on future operations.
Employee Ownership Models
Employee ownership models, such as ESOPs in the US and EOTs in the UK, create a gradual transition while offering tax advantages. In the US, owners who sell at least 30% of their C-corp to an ESOP may defer capital gains taxes under IRC §1042.
Family Succession
Family succession involves passing ownership to the next generation.
Valuation may be discounted to reflect financing limitations and estate planning goals.
This route takes time and requires early involvement of heirs in management.
Proper planning using gift exemptions, which stand at $13.61 million in 2025, can reduce long-term tax exposure.
Liquidation & Bankruptcy
Liquidation and bankruptcy represent last-resort options to consider. Liquidation often brings lower returns, particularly for service businesses, and may yield less than the company’s net working capital. Bankruptcy filings, whether through Chapter 11 restructuring or Chapter 7 liquidation, involve court oversight and leave owners with limited control over outcomes.
Tax & Financing Considerations
Taxes remain one of the most impactful variables in any exit. Long-term capital gains rates top out at 20% federally in 2025, with an additional 3.8% net investment income tax.
Sellers of Qualified Small Business Stock (QSBS) may benefit from exclusions under Section 1202, potentially shielding up to 100% of gains if holding requirements are met.
Financing tools can shape the structure of a transaction. SBA 7(a) loans, popular in management buyouts and partner exits, remain a preferred funding source, although lender fees were reinstated in March of 2025. Limits currently cap at $5 million, making them especially relevant for lower-middle-market transactions.
Some states apply franchise or gross-receipts taxes post-sale, which can impact an organization’s net proceeds. Early review of both federal and state-level obligations is necessary for accurate net-valuation modeling.
Steps To Prepare For a Future Exit
Effective preparation improves deal outcomes and gives owners more leverage during negotiations. The process starts with identifying personal goals, such as income needs, legacy ambitions, or employee transition preferences.
Getting a valuation early helps set expectations and highlight any value gaps. Despite this, only 15% of owners seek a formal appraisal prior to launching a sale process. Engaging the right advisory team, including an M&A attorney, tax professional, and financial planner, adds significant value.
Financial statements should be cleaned up, with audited or reviewed financials strongly preferred by private equity and IPO buyers. Once a buyer is identified, a signed letter of intent locks in headline terms while allowing for final diligence and contract negotiation.
After closing, attention should shift toward post-sale planning. That may include wealth preservation, reinvestment of proceeds, estate planning, and managing any earn-out periods still in effect.
Owners who take the time to prepare early and understand their options often enter the process with more confidence and end it with better results.
Making The Right Move At The Right Time
Choosing how to exit a business isn’t about finding the one perfect answer; it’s about understanding the full range of possibilities and aligning them with personal goals, company dynamics, and market realities.
If you’re currently considering a sale, recapitalization, or succession plan, Roadmap Advisors brings deep experience in valuations, buyer outreach, due diligence, and strategic transaction execution.
Our team works with owners across the lower-middle market to drive successful outcomes in even the most complex transitions. To begin a confidential conversation, reach out to our team by scheduling a consultation online.