Is a Tender Offer Right for You?

March 27, 2018 Shawn Murphy

In this age of companies staying private longer, some private companies still have their sights clearly set on an IPO. Some are in “maybe someday” mode, while others may never choose to take the leap. Every company is different, and there is no right answer — only the right answer for your business.

Many of our clients who are looking for an IPO alternative are asking us more and more about another option — the tender offer — which is a way to give their employees and investors liquidity without going public. Intrigued? Let’s look at these in more detail.

What is a tender offer?

A tender offer is a broad solicitation made by a company or a third party to purchase a substantial portion of the outstanding equity or debt of a company. Another name for this is a “controlled liquidity event,” since the company is acting as the gatekeeper of the transaction.

Quick facts

  • The tender offer can be funded by the company or investors.
  • The company sets subscription maximums for total and individual sales.
  • The plan administrator easily controls participant eligibility and sets the number of options or outstanding shares each participant may sell.
  • An online subscription page ensures employee elections are fully documented for the number of shares to be sold, held, or a combination of the two.
  • The tender offer can allow for participation by current and former employees, as well as current shareholders.
    Subscriptions can be prorated when participation is higher than anticipated.

The Shareworks tender offer approach: A safe road

Using Shareworks, we partner with our clients to manage their tender offers. Shareworks enables you to manage the overall transaction and allows your employees to log in and elect to sell their shares. Benefits to the company and to the company’s participants include:

  • Integrated participant engagement and communication.
  • Electronic distribution of legal and financial documents needed by participants to make an informed decision on what to sell.
  • Management of dates involved in the transaction. This includes setting up election dates, eligibility information, and recording the transaction dates.
  • Money movement. Your company sends Shareworks by Morgan Stanley the amount of cash needed by the offering, and Shareworks distributes the appropriate amount to each participant based on their elections.

There are complex rules (refer to the Williams Act and SEC Regulation 14E) to follow when a tender offer is made, which exist to protect investors and the company alike. It’s wise to seek guidance from a provider that has travelled that road before.

Get in touch!

If you feel that a tender offer is right for your company — or just want to know more about your options — get in touch!

If you’re not quite ready to contemplate this move yet, you can always sign up to our tender offer mailing list. We’ll keep you up to date on market changes, learning opportunities and equity comp events.

About the Author

As Director of Strategic Operations, Shawn Murphy ensures private companies receive the most comprehensive equity management solutions and software from Shareworks by Morgan Stanley. Formerly Executive Director at Morgan Stanley Australia, Shawn headed up Strategy and Business Development with a strong focus on talent management. Prior to that, she was co-founder of Morgan Stanley’s Microfinance Group in London, working to bridge the gap between capital markets and microfinance companies in developing countries. Shawn also has extensive experience in managing credit and operational risk across EMEA and Asia.

More Content by Shawn Murphy
Previous Article
The Basics of Convertible Notes: Convertible Note Terms
The Basics of Convertible Notes: Convertible Note Terms

A convertible note is short-term debt that converts into equity, which doesn't force investors to determine...

Next Article
10 Cap Table Mistakes That Could Cost You Money
10 Cap Table Mistakes That Could Cost You Money

Your cap table holds the key to a big payoff for all your hard work, but there’s a few mistakes that can re...