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Private Company Liquidity 101

March 11, 2022 Shareworks Marketing

Companies are staying private longer - The median age of a company at IPO is now 9-10 years, nearly double the median from two decades ago1. As companies stay private, shareholder pressure for a liquidity event may grow. One method of providing liquidity to longstanding shareholders is what’s known as a private company tender offer.

In a tender offer, a private company facilitates the sale of its stock from existing shareholders. The buyer of the stock varies. It could be a third-party approved buyer or even the company itself. One of the key aspects of a tender offer is that the company maintains control over the process, including who can transact, how much shareholders can sell, timing of the liquidity event and information disclosures. Technology platforms like the Morgan Stanley at Work Shareworks platform can help to streamline and automate the workflow of these often complex transactions.

This guide will walk through some of the basics of private company tender offers:

  1. What is a tender offer and how does a tender offer work
  2. Why private companies choose to conduct tender offers
  3. Who are the parties often involved in a private company tender offer
  4. When a private company might choose to conduct a tender offer

 


1 Jay Ritter. “Initial Public Offerings: Median Age of IPOs Through 2020” January, 2021. https://site.warrington.ufl.edu/ritter/files/IPOs-Age.pdf

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