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The past 18 months have marked the slowest initialpublicoffering market since the financial crisis of 2008. There are many reasons many American companies are so hesitant to go public. Some have gotten capital from other sources like private equity, family offices, unsecured lending sources, or even friends and family.
In private equity, potential exit options include a sale to a strategic buyer, initialpublicofferings, or a secondary buyout; well-defined exit plans ensure that the investment objectives are met and provide a clear path to realize value for the firm.
Airbnb initially bootstrapped their venture, but as their idea gained traction, they attracted funding from Y Combinator, a renowned startup accelerator, marking their official entry into the world of venture capital. Choosing the right exit strategy—be it acquisition, InitialPublicOffering (IPO), or management buyout—is critical.
Each method offers different benefits; finding the best option for your software company’s goals is essential to ensure that you clearly understand the landscape and how best to present your business when the time comes to pursue seeking external capital.
While the ruling has broad implications for many current arrangements (particularly stockholder agreements for public companies), it did provide a path forward, noting that many of these provisions would have been valid if included the corporation’s certificate of incorporation instead of the stockholder agreement.
Pursuing a “dual-track” process involves preparing for an initialpublicoffering at the same time as running a private M&A process, often through an auction. Relative to choosing a single exit strategy, a dual-track process tends to be more complicated and resource-intensive, while also posing some specific risks.
Although there were 104 initialpublicofferings of biotechnology companies in 2021 that raised nearly $15 billion in funds, 2022 saw only 22 such IPOs collectively raising less than $2 billion. Let’s dig in. Activists may be able to take advantage of high trading volumes to accumulate positions without early detection.
In an environment where licensing deals also present antitrust risk, big pharmaceutical companies may favor M&A instead to have full control over the assets – and make the cost of litigating against the antitrust agencies worth the time and money.
The rise of founder-led, venture capital-backed companies in recent years has coincided with a surge of companies implementing dual-class share structures in connection with their initialpublicofferings. In many cases, it may be appropriate for the dual-class company to adopt more than one of these approaches.
Software companies with a target on their backs Public software companies (particularly those with mature revenue growth rates) are often ripe acquisition targets for mega cap tech and highly acquisitive, software focused private equity sponsors, and therefore present easy targets for “sell the company” campaigns by activists.
Some sponsors, while unable to present compelling take-private proposals to targets, have deployed capital in private investments in public equity (PIPEs) of public targets, marketing these investments as both a vote of confidence for the incumbent board and much-needed liquidity to help the target weather the downturn.
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