Previously, we outlined the most common exit strategies for startups and why it is important to think about those strategies early. One of the most common exit strategies is mergers and acquisitions, or “M&A”. For a startup, this means the sale of all or a part of your company to another person or entity. Although M&A can refer to a sale of assets or equity of a company, we will primarily focus here on equity.
There are two types of M&A transactions which are distinctly different exit strategies: strategic and financial. A strategic M&A transaction would be the sale of your startup to another larger company that is a competitor, within the same industry, or that would enjoy some synergy with its current business by acquiring your company. Think of Amazon acquiring Whole Foods, Facebook acquiring Instagram and WhatsApp, or Google acquiring YouTube and Waze.