When Should a Private Company Think About Running a Tender Offer?

March 11, 2022 Shareworks Marketing

Tender offers often require a good amount of planning and coordination. Private companies may base the timing of their tender offer on a few factors:

Company Maturity

Based on historical tender offer data of companies who conducted a tender offer through Morgan Stanley at Work, private companies tend to conduct a tender offer when approaching their Series B or C financing or a $250 million+ valuation (although it is not uncommon for smaller companies to conduct them also). Companies typically have a few hundred shareholders with vested holdings that are eligible to participate.

Approaching a Funding Round

Some private companies may choose to couple their tender offer with an upcoming fundraise. In fact, more than half of the tender offers conducted with Morgan Stanley at Work in the first half of 2020 were offered by companies that completed a fundraise in the prior six months.1

Conducting a “follow-on” tender offer may provide a few benefits to the company, including streamlining information gathering and price negotiation for each transaction and allowing the company to use proceeds of the fundraise to cover a share buyback. Scheduling a secondary transaction after a primary round can also help minimize the variable impact of the transaction on the company’s next 409A valuation.

Other Market Conditions and Factors

Downturn markets, increased IPO activity, and unpredictable events like COVID-19 have all historically impacted private market liquidity. In addition, a company might perceive a liquidity need among a subset of their employees, such as perhaps long-tenured employees that don’t have the capital to exercise their expiring options.

Whatever the reason, tender offers can serve as a tool for attracting and retaining employees and promoting a strong culture of equity ownership.

Ready to learn more? Download the Private Company Liquidity 101: A Guide to Running a Tender Offer.

Previous Article
Who are the Parties Involved in a Private Company Tender Offer?
Who are the Parties Involved in a Private Company Tender Offer?

There may be other parties involved in a tender offer other than just the buyer and the seller.

Next Article
What is a Direct Listing and How Does it Impact Your Equity Plan?
What is a Direct Listing and How Does it Impact Your Equity Plan?

Learn the definition of a direct listing, how it differs from an IPO, and whether a direct listing may be r...

Explore our
State of Workplace Financial Benefits Study 2021

View the Report
Please note that by clicking on a hyperlink(s) you will leave a Morgan Stanley Smith Barney LLC ("Morgan Stanley") website and enter another website created, operated and maintained by a different entity. By providing the third party publication(s) and/or links to a third party web site(s), we are not implying that Morgan Stanley has an affiliation, sponsorship, endorsement, etc. with the third party or that any monitoring is being done by Morgan Stanley or its affiliates of any information contained within the publication(s) or web site(s). Morgan Stanley is not responsible for the information contained on the third party web site or your use of or inability to use such site. Nor do we guarantee their accuracy and completeness. The opinions expressed by the author(s) are solely their own and do not necessarily reflect those of Morgan Stanley. Because publication(s), website(s) and/or article(s) is copyrighted, you cannot reproduce it without permission. For example, even though the site where the article is hosted includes a print button, you may not print out the article and send it to a client or prospect without obtaining additional permission. Morgan Stanley at Work and Shareworks services are provided by Morgan Stanley Smith Barney LLC, member SIPC, and its affiliates, all wholly owned subsidiaries of Morgan Stanley.
CRC3917076 1/22