Forty-two million now, or a Series B and the chance of much more

A clean offer, a divided cap table, and a board where the people voting held a different class of shares from the people affected.

This is an anonymised composite, not a report about a named company or person. The situation and numbers are typical rather than reported.

Where they were

A company with 5,200,000 of ARR growing 55%, near break-even, received an unsolicited all-cash acquisition offer of 42,000,000 from a strategic buyer. It had raised 11,000,000 across two rounds; investors held 46% with 1x non-participating preferences, founders and employees held the remaining 54%. The board was three people: one founder, one investor director, one independent. An alternative existed: a Series B at an indicated 90,000,000 pre-money valuation, which would fund an attempt at a much larger outcome.

The problem

The offer was good for some shareholders and unremarkable for others, and the people deciding held different instruments from the people most affected. Continuing meant taking real risk with an outcome that was already acceptable; accepting meant ending a company that was working.

The decision

Accept the 42,000,000 offer, decline and raise the Series B, or use the offer to run a short process testing whether other buyers would pay more.

What was on the table

• Accept the offer
  For: An all-cash offer at eight times revenue for a company growing 55% is a clean, certain outcome. Preferred investors convert and take 19,320,000; common holders share 22,680,000, with the founder receiving about 11,760,000.
  Against: The company was near break-even and growing, so the offer may undervalue what another two years could produce, and the decision cannot be reversed.
• Decline and raise the Series B
  For: At a 90,000,000 pre-money valuation the market was already pricing the company above the offer, and the capital would fund a genuine attempt at a much larger outcome.
  Against: It replaces a certain 42,000,000 with a plan, adds a preference stack ranked ahead of common holders, and depends on funding conditions that can change quickly.
• Run a short competitive process
  For: Testing two or three other plausible buyers over six weeks costs little and either raises the price or confirms it, which strengthens the board's position either way.
  Against: Processes leak, the existing buyer may withdraw, and six weeks of management attention on a sale is six weeks not spent on the business.

What they chose

The board ran a six-week process with three other buyers. The investor director disclosed that their fund's preference meant they were affected differently from common holders and asked the independent director to chair the decision. No competing bid emerged above 42,000,000; the original buyer raised the offer to 45,000,000 to close quickly, and the board recommended acceptance, with the reasoning and the conflict disclosure recorded in the minutes.

What happened

The sale closed with 10% of proceeds held in escrow for 18 months, released in full. Two years later a comparable company in the same category sold for about 180,000,000, while two others in the category failed and returned nothing to shareholders. The board could not know which path it had avoided, and the record of how the decision was made proved more durable than any argument about the price.

What transfers

• Run the waterfall before debating the price. Who receives what at 42,000,000 is arithmetic, and it usually reframes the disagreement.
• When directors hold different share classes from the shareholders affected, disclosure and an independent chair are what make the decision defensible later.
• A short competitive process is cheap information. It either raises the price or removes the question of whether the offer was tested.
• The counterfactual is unknowable. Judge an exit decision on the process and the information available at the time, not on what a different company did two years later.

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