Actionable Ideas for Companies and Sponsors
M&A Exit Through a 144A Equity Placement
As a result of market volatility, the sale of all or a substantial part of a private company to institutional investors via a 144A equity placement is gaining renewed interest as an M&A exit alternative. In a 144A equity placement, the company’s owners sell their shares to a broad group of institutional investors, and the company then embarks on a defined registration timeline, after which it will list its shares on a public exchange.
The primary benefits to a company considering using a 144A Equity Placement as an M&A exit are: (1) speed of execution – owners can achieve liquidity in as little as eight to ten weeks versus risking greater market volatility undertaking a sale process; (2) the 144A market can bear a large amount of secondary shares (up to 100%) as a percentage of the company; (3) 144 institutional investors typically can afford to pay a competitive price for the business, given their return expectations and the opportunity for near-term trading liquidity; and (4) owners are required to make only limited representations and warranties in completing a sale via a 144A equity placement.