Exits & Returns

The real paths to an exit - acquisition, IPO, secondary sale, wind-down - and how returns are actually realised and distributed once one happens.

How the money actually comes back

Lessons

• Acquisition, listing, secondary sale or wind-down - most exits are the first and the last — Private investments return money through a sale of the company, a public listing, selling shares to another investor, or a wind-down. Public listings are the most visible and among the least common outcomes. (9 min)
• The headline sale price is not what investors receive — Proceeds from a sale flow through debt, transaction costs, preferences, escrow and earnouts before reaching each shareholder. The waterfall decides what a headline price is worth to you. (13 min)
• A listing gives you shares you cannot sell yet, at a price that can fall before you can — After an IPO, early investors typically hold shares subject to a lock-up period. The price at listing can change substantially before they are free to sell. (10 min)
• Selling early means accepting a discount; a wind-down usually means preferences take what is left — A secondary sale can return cash before a company exits, typically below the latest valuation. When a company winds down, creditors and preferences are paid first, and common holders commonly receive nothing. (11 min)
• Small shareholders mostly sign, but what they sign matters — An acquisition involves warranties, indemnities, escrow and a drag-along that can compel minority holders to participate. Understanding the documents before signing is the last chance to know what you are agreeing to. (11 min)
• Proceeds arrive as a large, concentrated, taxable event — An exit converts an illiquid holding into money, tax obligations and a decision about what to do next. Planning before the money arrives usually produces better outcomes than reacting afterwards. (11 min)

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