Besides going public, a company may consider selling itself to another company. This path is not that uncommon. For example, from 1998 to 1999, more than 20 companies sold out to Cisco Systems. For the selling shareholders, a sale offers several advantages to trekking down the IPO path.
A sale may offer liquidity. If a sale is for cash, the shareholders will not be encumbered by burdensome regulations restricting their disposition of stock. Even if a sale involves an exchange of shares, the shareholders may still benefit from a lower market risk. In choppy markets, the shares of a more established company may prove less volatile than those of a newer company.
However, a sale also involves some trade-offs. For example, the market may value a company more than the buyer's investment bankers. In addition to the immediate discount, the selling shareholders may also be surrendering a significant upside should the market grow enamored of the company or its market niche at some point down the line. Thus, the selling shareholders should contemplate whether the trade-offs weigh in their favor.