While it’s not ideal to think of failure when starting a business, exit strategies serve as a cushion if a business fails. It cushions the weight of the fall on the entrepreneur and limits the chances of heavier losses in the wake of selling off the business. Though you don’t want to think about failure, you should have a plan prepared — just in case.
In modern practice, especially for businesses planning to sell or invite investors, that plan often includes preparing documentation in a secure online workspace. Many Australian founders work with advisors to organise contracts, financials, and operational data in a virtual data room long before they formally exit. This makes it easier to react quickly when an offer appears and ensures sensitive information is shared safely during negotiations.
Failures aside, maybe you just want to move forward with your life. Perhaps you’ve chosen a new career path, and now you’re faced with either selling your business or handing the reins to someone else. You need an exit strategy in place to ensure the transition process is smooth and to prevent any unnecessary financial losses.
For Australian companies, this might mean getting your bookkeeping, tax records, ASIC filings, and employment contracts in order, then placing them in a structured data room so potential buyers, lawyers, and accountants can review everything without endless email chains. A secure electronic data room can shorten deal timelines and reduce the risk of a buyer walking away during due diligence.
In light of that, let’s flesh out what exit strategies for businesses are and discuss how to implement them.
What is an exit strategy?
A business exit strategy is the owner’s concrete plan to sell off their business to an investor or to another company. If it’s a partnership, then an exit strategy is the entrepreneur’s plan to sell off their stake in the business.
Alongside the financial and legal aspects, a practical exit strategy now usually includes a clear data and document strategy. That means knowing which contracts, IP registrations, lease agreements, and operational manuals must be ready, and deciding where they will be stored so buyers can access them securely. For many founders, this means setting up a data room early, even if they do not plan to exit for several years.
A business exit strategy comes in handy when a business is struggling to stay afloat and the owner wants to sell it. It’s not only important for struggling businesses. An owner may decide to sell their business when the business is thriving, that way, they can get a higher price. This may occur, for example, when the business has met predetermined financial goals or the owner is ready to retire.
For example, a profitable Australian engineering or oilfield services business might not be in distress at all but still choose to sell while performance is strong. In these cases, the owner’s exit strategy often includes preparing marketing materials, assembling a deal team, and opening a secure data room so potential buyers can review technical and commercial documents in stages as interest grows.
So at the fundamental level, a business exit strategy is a plan put in place to sell off a business whenever the need arises. It’s planning ahead and putting things in order to aid the smooth transition of a business from one owner to another.
Why is it important to think about an exit strategy?
Whether it’s a small business or a corporation, an exit strategy should be in the business plan before it even kicks off. Planning an exit strategy when it’s time to get out is like preparing for war on the battlefield — this will most likely lead to failure.
In Australia, this early planning is especially important when overseas buyers are involved, as they will expect professional processes, clear documentation, and a secure online environment for reviewing information. Being able to invite them into a properly structured data room shows that the seller is serious and organised, which can improve buyer confidence and valuation.
Selling a business or handing it over to someone else is never an easy task. A lot of things come into play, and you can’t plan for all of them in the heat of the moment. Emotions can obscure and obstruct rational thinking causing the transition to go awry. What often happens is that rash decisions are made, and the seller is forced to accept less than they bargained for when it’s time to let go.
When everything is scattered across email accounts, old folders, and physical binders, the pressure gets even worse. Buyers ask for information, the seller scrambles to find it, and mistakes are more likely. A structured data room prepared in advance reduces that stress. It allows you to decide calmly what to share, when to share it, and with whom, instead of rushing to upload files under deadline pressure.
To avoid this ugly business situation, it’s better to plan ahead even if you don’t see the point in doing so. Just draft out an exit strategy and you can edit it with time.
- Pro tip. For small businesses, it’s more important to think of an exit strategy at the onset if financial assistance from investors will be needed. These investors need to see an exit plan so they can be sure of where they stand in the event the business fails. They need to be certain that their stake is safe if the business were to fall.
The same investors often ask how information will be shared and protected. Including a brief section about your planned data room setup in your exit strategy can reassure them that future sales, mergers, or capital raises will follow a professional process and protect their confidential information.
Types of business exit strategies
There are five types of business exit strategies, they include:
- Liquidation
- Selling your share to a partner
- Selling to another business (Acquisition)
- Initial Public Offering (IPO)
- Merger
Let’s take a closer look at each of them below.
1. Liquidation
Liquidation is an exit strategy where the owner of the business shuts it down entirely and sells off its assets to pay off creditors and investors. The business’s creditors receive payments owned before assets are shared with investors in this type of exit strategy.
There are two types of liquidation:
- The first is the one we already mentioned, where the owner closes the business immediately and sells off the assets or repays investors and creditors. This is a straightforward method, you sell off assets to salvage as much cash as possible.
Even in this scenario, a simple data room can be useful. You can centralise contracts, asset registers, lease documents, and major customer records in one place so liquidators, accountants, and potential buyers of specific assets can review what they need without long email chains. - The second process occurs by liquidating the business slowly over time — you no longer reinvest in the business. You just let it run its course — until you are out of current stock and you’re forced to close.
In a gradual wind-down, an online repository of documents can help you keep track of which assets have been sold, which contracts are still active, and which obligations remain. That way, if an unexpected buyer appears during the process, you already have a structured information pack ready to share.
2. Selling to a partner or a personal acquaintance
This can be a more comfortable exit route as you are selling the business to a family member (commonly known as a legacy), friend, spouse, or partner. However comfortable this strategy might seem, you still need to be careful and sincere not to ruin the relationship you have with the buyer. Be sincere about the details of the business, list all the assets involved, and be as transparent as possible.
A small, private deal like this can still benefit from a simple, secure online data room. Even if both sides trust each other, putting documents into one place with clear folder structures, version control, and basic access rights helps keep the process clean. In Australia, where many family businesses are passed down through generations, using a data room can also make it easier to involve accountants, lawyers, and financial planners across different states.
3. Selling to another business (acquisition)
In the acquisition process, the business owner lets another business or competitor buy off the company while retaining the staff of the acquired company and its owner. Staff retention is determined by the buyer in an acquisition, but the business owner, a.k.a. the seller, is often offered a position in the new company.
For this type of transaction, a well-structured M&A data room usually becomes the central hub of the entire deal. Financials, contracts, HR information, customer data, and operational manuals are all uploaded in stages. In the Australian market, this is standard practice for corporate deals, whether the buyer is local or overseas. It allows bidders to conduct detailed due diligence without travelling to a physical office and keeps a full audit trail of who saw what and when.
The acquisition exit strategy can also work if the owner decides to give up their entire stake in the business or ownership to the acquiring company and decides not to be involved in the new company. It can work either way depending on the agreement between the business and the buyer, but the seller is often contracted and obligated to stay on board for a predetermined period of time to ensure a smooth transition of business operations.
Acquisitions are more effective when the seller is larger than the business being bought, otherwise, a merger may be the better option.
In resource heavy sectors like mining and energy, buyers also expect a specialised data room for oil and gas industry assets, including geological surveys, seismic data, environmental reports, and joint venture agreements. These data sets can be massive and highly sensitive. Using a robust virtual data room platform allows Australian vendors to share that information securely with shortlisted bidders, often across multiple time zones and regulatory regimes.
4. Initial Public Offering (IPO)
An initial public offering (IPO) occurs when the company’s stocks are first sold to the public. An IPO is used to (hopefully) raise a large amount of funds to fund business operations and can be a strategy used to avoid a bankruptcy filing. However, because the corporation is no longer a privately held company, it will now be subject to more government regulations and be compelled to publish quarterly financial reports.
This process takes longer to achieve and involves much paperwork. The business will need to find an investment bank, register with the Security Exchange Commission (SEC), and go through a few other measures to begin the IPO process. It’s not an ideal option if you are looking at a fast exit route from a business.
In practice, IPO preparation also involves sharing large volumes of information with underwriters, regulators, and advisors. Many companies rely on a virtual data room to coordinate draft prospectuses, legal opinions, and financial models. For businesses listing on the ASX, using a data room helps ensure the right version of each document is available to the right party at the right time, which can reduce errors and delays during a demanding listing process.
5. Merger
The merger exit strategy entails merging with a similar business — preferably a larger business to add value to your smaller business.
A merger works for those who want to continue their business but lack the financial capacity to do so. If you want to exit the business entirely, you might consider the other exit strategies.
A merger can occur between two companies with similar products and services to take advantage of their combined resources. Conversely, two businesses with nothing in common may decide to merge and to form a conglomerate, this allows the two companies to not only form a larger company but also gives each entry into other markets.
Because mergers involve both sides sharing sensitive information with one another, a secure data room is often used on both sides of the table. Each company can grant controlled access to its financials, contracts, and operational data while restricting downloads or forwarding. This is especially relevant where the two companies are competitors in the same Australian industry and want to avoid sensitive information leaking if the merger does not proceed.
Conclusion
Every business needs to plan ahead and prepare for its future. Business exit strategies are there to help businesses transfer ownership to buyers or investors as a way of maintaining financial stability. A well-planned exit strategy can often save a business partner or owner from a road to financial ruin.
In digital environment, that planning goes beyond legal clauses and valuation formulas. It also includes deciding how you will organise and protect your data so potential buyers, investors, and advisors can review it safely. Whether you are considering liquidation, a family succession, an acquisition, an IPO, or a merger, using a virtual data room tailored to your industry and location can make your chosen exit path smoother, more transparent, and more secure.
