The investment is sold to another company, usually to a strategic investor. The trade sale represents an alternative to an IPO as an exit channel for investors if the company is not ready for the stock exchange because the strict criteria are not met or the IPO takes too long. Strategic investors usually use such acquisitions to gain market share, leverage synergies or enter the market and are therefore prepared to pay a not inconsiderable premium on the company value. In addition, a trade sale is much cheaper than an IPO and usually includes a so-called cash exit without a blocking period for the sale of shares.
However, there is also the danger that there are too few bidders in an auction to carry it out in a controlled and efficient manner. As a further advantage, the sale is not only easier and quicker to realize compared to an initial public offering, but also more cost-effective. However, a purchase of a strategic investor can also take place in earlier phases. Large companies could see this as a cheaper alternative to a cooperation or license agreement. Thus, the strategic partner gains direct access to the technology and can use it for his own purposes.