I’ve been learning more about start-ups recently and have noticed a lot of them want to be acquired. Why is this? Could they also choose to grow their business?
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An acquisition is the generally the cleanest way to exit or what’s known as a “liquidity event”. It’s an opportunity for the founder, employees who have shares and investors to get a return on their time/effort/money.
The other ways to do it either take longer or have a lot more regulatory stuff involved:
* IPOs are the toughest by far. You gotta get through a ton of filings and expose all your numbers then go on a roadshow and find investors. After all that your stock is likely to tank once it goes public if you can even get the valuation you want (price per share).
* Buy out – very hard to find someone to raise the money and buy out your company. Very few folks have the money/connections to outright buy a business and the ones that do generally don’t have an interest in running one.
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