While both strategies are very feasible for larger companies, usually an M&A exit is much more feasible to a smaller company. In fact, if your company is to small then the guys on Wall Street won’t even give you the time of day and as we all know, they are the ones would lead you through that process.
An M&A is also one strategy that could be completed at nearly any time, while the IPO may a few years to go through all of the legal issues dealing with the SEC and Wall Street in general.
One of the best things about an M&A exit strategy is that it may come out of relationships that present an opportunity.
This means that a business does not even have to take the time and money to present itself to a number of different buyers and convince them that it would be a good acquisition; the company comes to them and says, “you would be a good acquisition for us,” and the deal begins.
Another M&A exit strategy is to find M&A advisors and investment bankers to take you through the M&A process and identify a number of different buyers who may or may not be ready and willing to make the acquisition.
In order to go through the IPO process your business needs to be of a large enough size that it can get the attention of the bankers on Wall Street.
Although we may not have seen this in the most recent years due to the 2008 market crash, in a typical environment the bankers are usually selective in the companies they represent and lead through an IPO.
Typically these companies will have a few quarters of growth along with pretty high growth rates.
Again, this process also takes a fairly long time from beginning to end.
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC, a middle-marketing M&A and capital advisory firm.
Nate works with corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He holds Series 79, 82 & 63 FINRA licenses and has facilitated numerous successful engagements across various verticals.
Four Points Capital Partners, LLC a member of FINRA and SIPC. Nate resides in Seattle, Washington.
Anatomy of an IPO Valuation - WSJ
Check the background of this Broker-Dealer and its registered investment professionals on FINRA's BrokerCheck.