Exit strategy for those investing in in start-ups: M&A or IPO?

Exit strategy for those investing in in start-ups: M&A or IPO?

As an investor operating in the start-up world , a fundamental role is played by the exit strategy to be implemented. This is because the investor, beyond the trend of the same, will obtain a greater profit if an adequate exit strategy is implemented .

Specifically, we will discuss, in the context of the exit strategy , both “Merger and Acquisition” and ” Initial Public Offering” operations . The first is an operation for which a large competitor of the startup decides to carry out a horizontal integration and acquire the entire company. The second is the placing of an equity stake in the securities market.

The choice to use an exit strategy depends on a series of factors, in fact it is necessary to consider how the startup operates, the reference market and the trend of the last financial years.

These are fundamental factors for choosing whether to carry out an M&A transaction or the IPO .

The former will in fact be more likely if a large company that is interested in the same operates in the startup ‘s reference market . For the IPO, the discourse can be different and even more complicated given that in order to adequately achieve this type of process, the company in question needs certain assumptions that can hardly be achieved in a short time.


In an empirical study carried out by analyzing a sample of around 10,000 startups, we analyzed what kind of strategy is usually used by startups. It is shown that for most cases the M&A process is preferred for almost 90% of cases compared to the IPO.

It can be inferred that this may depend on a purely strategic factor, given that competitors prefer to make horizontal additions to obtain more knowledge and a wider market share; both from a purely technical factor, given that many startups fail to obtain the minimum requirements required to face an  IPO.

Going further to analyze this sample of companies, we see that the resources obtained from these exit strategies focus more on shares greater than 100 million.

From these statistics we can therefore denote that startups strongly prefer, among the exit strategies , the M&A process rather than an  IPO, which in a strategic perspective can be considered more adequate for its competitors.

The BizPlace Team

Want to know more about exit strategies?