Status
Acquired
Acquired companies have been purchased by another entity, either for cash, stock, or a combination. Acquisitions can range from acqui-hires (primarily for talent, often at or below invested capital) to strategic acquisitions at significant premiums. The acquisition price relative to the price of the last funding round determines whether angel investors see positive returns.
Criteria
- Company has been purchased by an acquirer
- Transaction has closed
- Shareholders received consideration (cash/stock)
- Company may continue operating as a subsidiary
Implications for Investors
- Investment is fully liquidated
- Returns depend on acquisition price vs entry price
- May receive cash, acquirer stock, or earnout payments
- Tax event triggered on receipt of consideration
Market Distribution
Value Distribution
- <$100M3
- $100M-$500M1
- $500M-$1B1
- $1B-$10B1
- $10B+2
Frequently Asked Questions
What types of acquisitions are there?
Acqui-hire (talent acquisition, usually low return), strategic acquisition (product/market synergy, moderate-high return), and competitive acquisition (eliminating competition, often premium pricing).
How is the acquisition price distributed?
Proceeds follow the liquidation preference waterfall: debt holders first, then preferred shareholders (investors) get their preference, then remaining proceeds are split according to participation rights and common stock holdings.
What if the acquisition price is less than the last round price?
This is called a "down exit." Investors with liquidation preferences may still recover their investment, while common shareholders (including founders) may receive little or nothing. This is why liquidation preferences matter in term sheets.
