From acquisition to IPO: How to approach various exit plans

Exits feel far away… until they aren't. A buyer emails you out of the blue. A competitor gets acquired, and suddenly your board is asking questions. A late-stage round of funding forces the conversation about how, exactly, investors will get a return on their investment.

Exit planning is about considering all your options — in advance. That way, you're not making decisions about the future of your company under pressure. Your approaches to hiring, structuring your cap table, and growth will shape which exit paths are open to you in the future.

When you understand your options early, you can choose strategies that match your desired outcome.

Many founders think about how to exit a startup in vague terms (like "getting acquired" or "going public"), without understanding how different these paths really are. Different types of startup exits have their own processes, requirements, and outcomes.

1. Acquisition

What it means: In an acquisition, your company is purchased by another company.

During acquisition discussions, both parties determine if there’s a product fit or a fit within a larger organization. Some startups may also pursue an acquisition because they have limited remaining runway. 

Acquisitions happen in a few different ways:

• Strategic acquisition: The buyer wants your product, access to your market or distribution, or a combination of talent and IP.
• Acquihire: The deal is primarily about talent, and your product may be sunsetted.
• Private equity, buyout, or majority sale: The buyer focuses on cash flow, operational efficiency, or using your company as an add-on to a larger portfolio strategy.

Founder outcomes after the startup merger and acquisition (M&A) process vary widely. You might receive cash at close, or a significant portion could be tied to earnouts based on future performance. Some founders stay at the company with an ongoing role, while others have a specific exit timeline. The structure depends on the buyer's goals and how much leverage you have during negotiations.

2. IPO

What it means: During an initial public offering (IPO), you list stock shares publicly and become a public reporting company. 

This exit path works well for companies with large addressable markets, predictable revenue, and the internal maturity to operate under public scrutiny.

However, there are a lot of "IPO readiness" standards and factors to consider, including: 

• Financial reporting and audits that meet SEC standards
• Internal controls, governance structures, and a CFO or finance function 
• A product that public markets understand, including a clear growth profile and a credible path to improving margins

Founders often underestimate the time, compliance burden, and leadership bandwidth required. Preparing for a public offering is a multi-year effort. Plus, once you're public, quarterly reporting cycles and investor relations become a permanent part of your organization.

3. Secondary sales

What it means: During a secondary sale, existing shareholders sell some of their shares to new buyers. The company itself doesn't "exit." It's a liquidity event, not a change of control.

Secondaries come up in a few scenarios, including when:

• Founders want to de-risk personally, without selling the whole company.
• Investors expect some kind of liquidity plan in a late-stage funding round.
• Your company wants to provide employees who hold equity the chance to realize some value.

Secondaries have been playing a bigger role as startups stay private longer. According to Pitchbook-NVCA Venture Monitor, nearly 30% of secondaries in the first half of 2025 were purchased at a premium to the most recent equity financing round. 

Secondary sales for founders can reduce personal financial pressure and extend a company's runway by keeping key people motivated. But they don't remove the need for a longer-term plan. Someone still needs to think about what happens to the company eventually.

When assessing startup exit strategies and deciding which approach makes the most sense for you and your business, consider these factors.

Before debating IPO vs. acquisition pros and cons, start with your constraints. On top of your startup’s internal readiness, you may have external pressures. For instance, you might be facing employee or VC expectations at exit and want the best possible outcome for these stakeholders.

The right exit depends less on what sounds appealing and more on what's actually possible given your company’s specific situation.

Cap table reality 

Is your cap table up to date? Has it been well-managed? You’ll want to audit your cap table, or hire someone to do it for you. You’ll also want to make sure you have all documentation and record-keeping in order.

Once you know your cap table is accurate, then you can consider the financial outcomes of any exit path. If you don’t do this in advance, you’ll be scrambling when you’re presented with an exit option.

Runway and leverage

When you have time, you have more leverage. A company with eighteen months of runway can negotiate from a different position than one with six months. 

You’ll want to consider not just your expected outcome, but your range of possible outcomes. Earnouts can change the math significantly for you as a founder. A lower number with achievable milestones might net you more than a higher number with aggressive targets.

Company profile

Does your company experience high growth and high burn? Or slow growth with strong profitability? How you’ve run your company maps to different outcomes. Acquirers have different motivations than those of  private equity buyers or public markets. 

Beyond the business metrics, consider what you want personally. Staying on as CEO versus reporting to a buyer's leadership team are very different experiences. So is maintaining board control versus becoming a minority shareholder in your own company.

These startup exit planning questions don't require immediate answers. However, thinking through them now will help you make better decisions when the time comes.

Consider these questions:

• How quickly could each exit happen, if it needed to?
• What is the operational complexity of preparing for an exit?
• What will this mean for the team?
• What happens to the product roadmap and brand?
• How do I feel about acquisition vs. IPO vs. a secondary sale?
• What can I expect for a startup valuation at exit?
• Am I ready to stop operating?
• What kind of legacy do I want?

Every founder deserves an informed path, even if selling your startup feels years away. Preparing for a startup acquisition, IPO, or secondary sale now will make things easier later.

Here are steps you can take now:

1. Keep your books clean. The earlier you establish good habits, the less painful the cleanup will be.
2. Maintain a clean cap table. Know exactly who owns what, what preferences exist, and what happens in various exit scenarios. 
3. Ensure investor alignment. Have direct conversations with your major investors about their expectations and timelines. 
4. Build scalable systems. Document processes, delegate decision-making, and build teams that can function without your involvement.
5. Track the right metrics. Monthly recurring revenue (MRR), gross margins, churn, and net revenue retention will matter in every exit scenario. 

As part of preparing your company for an exit, Tom Stimson, president of Stimson Group, LLC and an expert in business strategy, says that you should challenge your assumptions about revenue increases and profit. “Meet with stakeholders. Have honest conversations about your goals and how to reach them,” he wrote in an article on LinkedIn. “Your exit strategy will develop better because you planned proactively.”

You don't need to "pick an exit" today. Markets change, companies evolve, and opportunities appear even when you’re not expecting them. 

An exit is not the finish line. It’s a transition for your company — and for you. Building toward a founder-friendly outcome means thinking about exit strategies early and planning accordingly.

Mercury supports the financial foundation that keeps your options open, from treasury management to operational infrastructure.