An acquisition is a transaction where a buyer takes control of a company or its assets, usually paying cash, stock, or both to sellers.

How it works

Strategic buyers seek product fit or market share; financial buyers (private equity) seek cash flows to lever and improve. Venture exits often start with informal talks, move to LOI (letter of intent), then diligence, definitive agreement, and regulatory clearance if needed.

Stock deals buy the whole entity—including liabilities. Asset deals cherry-pick IP and contracts, leaving shells behind. Price may include upfront cash and contingent earn-outs tied to retention or revenue milestones. Shareholder approval and board consent trigger liquidation preference waterfalls that determine who actually receives proceeds.

Why it matters

• Founders: Start relationship-building with potential acquirers before you need them. Process takes months; exclusivity locks you out of other bidders.
• Investors: Return multiples depend on competitive tension and clean cap tables. Secondary sales during M&A are rare for early shareholders unless negotiated.
• Operators: Integration plans, customer communication, and equity acceleration terms decide whether the deal feels like a win day-to-day.

Common mistake

Fixating on headline enterprise value while ignoring transaction fees, escrow holdbacks, earn-out probability, and preference stacks that zero out common holders.

Related ideas

Add-on acquisition, acqui-hire, change-of-control, and IPO as an alternative exit.