Full Definition
An acquisition occurs when one company purchases another company, either through buying its equity (stock acquisition) or its assets (asset acquisition). Acquisitions are the most common exit event for venture-backed startups, far more frequent than IPOs.
Types of Acquisitions
- Strategic Acquisition: Buying for product, technology, or market access
- Acqui-hire: Buying primarily for the team's talent
- Competitive Acquisition: Buying to eliminate a competitor
- Consolidation: Merging with a similar company for scale
Acquisition Multiples
- SaaS companies: 5-15x ARR (varies by growth rate)
- E-commerce: 1-3x revenue
- Deep tech: Often based on IP value and strategic importance
Real-World Example
Google acquires an AI startup for $500M — 25x revenue — primarily for its proprietary language model technology and research team.
Related Terms
A planned approach for founders and investors to realize returns on their investment in a company.
The process of offering shares of a private company to the public for the first time on a stock exchange.
A model showing how exit proceeds would be distributed to each class of shareholders in various scenarios.
The right of preferred shareholders to be paid before common shareholders in a liquidation event.
The comprehensive investigation and evaluation of a company before finalizing an investment deal.
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