Originally published on May 20, 2002
Key Issues for a Venture Capitalist to Consider When Selling a Portfolio Company
Given today’s economic environment and capital markets conditions, sales of venture-backed companies are becoming increasingly frequent. This article provides a brief overview of some of the key points a venture capitalist – particularly one serving on the company’s board of directors – should keep in mind when considering an acquisition proposal for a portfolio company.1
Understand how the aggregate deal consideration is to be allocated among all equity holders of the target company.
Acquiring companies often propose an acquisition price without specifying how this will be allocated among the various classes of equityholders of the target company. This allocation is generally determined by a combination of the acquiring company’s intent in this regard, the desire of the board and stockholders of the target company, and the terms of the target company’s governing
