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M&A Days

November 9, 2004

Boston Lawyer Gabor Garai contributes an opinion piece to BusinessWeek that fairly well explains why VCs are focussed on M&A as the primary exit strategy rather than IPOs. Garai pulls numbers to show that indeed VCs would prefer IPOs: “So even though companies that go public fetch higher valuations than those that are acquired — on the order of 20 to 30 times earnings before interest, taxes, depreciation and amortization (EBITDA), vs. 5 times to 10 times EBITDA for companies that are acquired — venture capitalists are first and foremost realists.” Given the gauntlet comapanies must run before an IPO, VCs focus on the positives of M&A: quicker access to cash and greater focus on product than quarterly earnings.
Read – Pop The Bubbly Its a Buyout (BusinessWeek)

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