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Consider two facts:

A significant part of the value of many businesses is the real property from which they operate, being factory, warehouse or office premises.

The vast majority of management or employee buy-outs are funded by debt, as employees traditionally do not have large amounts of spare capital.

Obviously, purchasing real property with the business can be a problem for an MBO team, so if you plan for your business to be bought by your management or employees you need to consider whether it is feasible to include in the sale the real property from which the business operates. On the one hand, including the property will push up the sale price but, on the other, excluding it will reduce the hard assets available as security to support the borrowings.

If the company that owns the business also owns the property (as apposed to it being owned by another company or the owner privately) a sale of shares will automatically mean the property will be included in the sale. If you own the property in your own name, you can exclude it from the sale and rent it to the new business. There are also capital tax advantages in owning the property as an individual, rather than through a company.

Once you have decided that an MBO or an EPO is the optimum exit option you should review the ownership of any business properties and allow yourself time to adjust their ownership if necessary, subject to expert advice.

One can see clear regional differences in the same society or nation for the desire to establish entrepreneurship and further advance ahead. This however, does not mean that people of some places are made (gifted) for entrepreneurship and others are not. I am of the opinion that any place in this universe is a fi t case for an entrepreneurial activity. Some are able to sense (get insights) while others do not. Even getting insight alone will not be adequate enough for entrepreneurship unless the skills to exploit the market and utilize the resources as well as opportunities are not adequately developed.

An entrepreneur always has to have space for unexpected happenings in the process of any entrepreneurial venture. Market turbulence and unpredictable environment, organizational factors like strategy, structure and leadership, managing people and resources including technology, political stability, and sociocultural factors play a very crucial role in developing entrepreneurial culture in society. Organizations will find it diffi cult to involve a majority of the people if they are unable to create a culture where most are oriented towards innovative activity, leading further towards entrepreneurial outcomes.

In the structural approach, assets and liabilities of a company are modeled simultaneously. Thus, structural models are based on fundamental company data, focusing on its balance sheet and asset value. Default occurs when the value of the firm’s assets falls below its liabilities. Consequently, the required inputs comprise the firm’s liabilities, usually taken from its balance sheet, market value of equity and (implied) equity volatility. Since equities are typically more liquid than corporate bonds, one may argue that equity prices tend to reflect the value of a company’s assets more accurately.

Using information from the equity markets allows fixed income instruments to be priced independently, without requiring credit spread information from related fixed income instruments. However, if equity prices become irrationally inflated or deflated, as we have experienced during the equity hype of the late 1990s, they may be misleading indicators of actual asset values. Generally it is assumed that one can reasonably infer asset values from equity prices. An option pricing model is then used to derive the volatility of the firm’s assets. Although it is generally possible to model financial institutions in the structural framework they should be treated with caution, since it is difficult to assess their assets and liabilities.

Furthermore, since financial institutions are highly regulated, default may not occur even if the value of assets falls below the firm’s liabilities.

The traditional fundamental approach and structural models generally are based on the same set of balance sheet inputs. But while the fundamental approach used by most credit analysts requires thorough company and industry knowledge and is therefore rather costly and time-consuming, equity-based models are an efficient means to screen broad universes of credit issuers. However, structural models allow to incorporate credit analysts’ forecasts to take account of qualitative information that is not yet reflected in the balance sheet. Projections can be used to create more realistic estimates of the default threshold or to generate different scenarios with respect to future liabilities.