Seattle Tech Week Takeaways: How to Set the Stage for Your Big Exit

After a touch-and-go few years, the environment for exits like IPOs and mergers is beginning to show signs of life. And with new green shoots forming, there’s no better time for up-and-coming companies to ensure they're prepared to reap the rewards. For Seattle Tech Week, Fenwick partner Amanda Rose sat down with MUFG’s Mario De Luca, and Moss Adams’ Findley Gillespie and Cory Brunn to discuss the state of play and what companies eyeing an exit can do to prepare. Here’s what we learned.

The exit environment is beginning to look better, despite some lingering uncertainty. Global equity markets performed well for the first half of 2024, and the United States remains a great place to start a business and have a successful exit—with strong H1 equity market performance and GDP growth that has handily outpaced other G10 countries. That’s all against a backdrop of several recent low-probability, high-impact events: COVID, wars in Europe and the Middle East, banking stress, inflation, and policy tightening. And while the markets are in a pre-election lull, they historically rally after the political dust has settled in November.

Meanwhile, we’re in the early innings of an M&A recovery, with $1.6 trillion in H1. Megadeals—particularly in the energy sector—pushed that value higher than the same period last year, despite H1 2024 seeing 13 percent fewer transactions overall.

All eyes are on 2025. The IPO market is starting to thaw, but there is still near-term uncertainty. Market sentiment is generally more optimistic about 2025, particularly with election tailwinds and a potential rate cut. If you are targeting a 2025 IPO, now is the time to start getting ready.

Tailor your story. Acquirers and investors want to hear different things. When you’re strategizing for an exit, consider what your target is looking for and make sure you can tell that story. Potential acquirers are typically interested in growth, but for most IPOs in today’s environment, you need to show consistent growth paired with a clear line of sight to near-term profitability.

Get your house in order. Companies can undertake a wealth of practical housekeeping measures well before an IPO to minimize potential problems. That starts with strong counsel and a knowledgeable banker who can advise on strategy and connect you with potential investors. Evaluate internal readiness by assessing your financials, governance, management, and reporting systems. Companies need at least two years of audited financials in the IPO prospectus, so starting early on a Public Company Accounting Oversight Board audit is important. And think about your board—is it public-company-ready, with a diversity of backgrounds and skillsets?

SPACs on the backburner. The appetite for going public through a so-called Special Purpose Acquisition Company (SPAC) has waned since its zenith a few years ago, in part due to new SEC rules issued in January. Meanwhile, reverse mergers remain a similar-but-niche option, though most companies will go public via an IPO, or less commonly, a direct listing. For many tech companies, the traditional IPO will remain the preferrable choice.

For more practical considerations, check out our corporate insights.