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With IPOs not as attractive (or necessary) as they used to be, and the unicorn club getting ever busier, where do companies go for additional liquidity, and investors for an exit?
Later stage private equity provide opportunities to quickly access deep pools of capital, yet these funds have a fixed time horizon, and so can really only be seen as passing the buck.
This leaves strategic acquisitions, with deep-pocketed incumbents an alternative for companies looking to avoid public markets.
With marquee fintech firms such as LendingClub and Square having underperformed since going public, is the time of strategic acquisitions upon us?
Some may end up here because public markets are not available but I’m not sure how a private equity investor would look at the cash requirement,” Some unicorns have hit multiples of 12-15X revenue. Public companies average 5X revenue multiples. This discrepancy may be enough to scare potential buyers away, but if exit opportunities continue to become more limited, companies may be forced to take what they can get at lower valuations.
