As the economy struggles to recover, a number of tech startups have found themselves in potentially a challenging situation. Founders who are trying to exit and cash out may want to consider selling their company to private equity firms. With a lot of uninvested capital at their fingertips, PE firms have been hunting for ideal companies that fit into a ‘buy-and-build’ strategy. Should a tech startup have solutions that complement well with a PE firm’s existing portfolio company, it could be acquired as part of a larger entity to generate greater value. In this article, we explain more about the strategy and how startup founders can potentially end up with a substantial payout by considering this approach.
This type of growth strategy in private equity land has been gaining acceptance and steam over the last decade. The platforms backed by the private equity funds often pay a “strategic” value, while moving at the speed of private equity. This is extremely attractive to sellers seeking a fair valuation in a reasonable timeframe. Based on our real-time transaction experience, private equity funds are even more hungry for add-ons, even in today’s pandemic environment. Entrepreneurs and executives who are considering a sale transaction, should strongly consider the advantages of selling to a private equity backed platform.