Exit strategies in venture capital: trade sale, secondary or IPO?

But not all exits are the same: choosing the right strategy to get there depends on numerous factors – in particular, the market environment, the maturity of the company, the investor structure, and the legal framework. In this article, we examine the most common exit options from an investor's perspective and highlight the legal and strategic considerations that may play a role.

1. Trade sale – the classic company sale 

In a trade sale, the company is sold to another company – often a strategic buyer from the same industry. For investors, this is often the fastest and most predictable exit. 

• Clear purchase price structure (cash or shares) 
• Fast execution possible 
• No public market required 

Legal aspects: 

• Tag-along rights and drag-along obligations must be clearly regulated to enable a smooth exit. 
• Guarantees and indemnities in the purchase agreement (SPA) are critical and should be limited to the bare minimum if possible to enable a clean exit.  
• Non-competition clauses and earn-out provisions can influence the interests of founders and investors. 

2. Secondary sale – sale to other investors 

In a secondary sale, existing investors sell their shares to new investors, such as growth funds or strategic investors.  

Advantages: 

• Flexible exit for individual investors 
• No exit of the entire company required 
• Often faster and less public than an IPO 

Legal aspects: 

• Approval requirements of the company or other shareholders must be observed. 
• Information rights and due diligence by the buyer are common. 
• Valuation issues can lead to conflicts of interest with remaining shareholders. 

3. IPO – going public 

An IPO is the most prestigious but also the most complex exit option. It offers high visibility and liquidity – but is only realistic for a few start-ups. A look at the recent history of IPOs in Germany illustrates this. 2024 was not a good year for IPOs overall, and industry experts expect IPO opportunities in 2025 only for the German energy start-up 1Komma5° and the Berlin-based fintech company Raisin.  

Advantages: 

• Access to capital markets 
• Higher valuation possible 
• Secondary sales after lock-up period 

Legal aspects:

• Prospectus obligations and transparency requirements are high – especially with regard to BaFin and the stock exchange. 
• Corporate governance must be structured in accordance with stock exchange requirements. 
• Lock-up agreements regulate when and how investors may sell their shares. 

Conclusion 

Choosing the right exit strategy is a key part of investment planning. Investors should ensure that clear contractual arrangements are in place from the outset, particularly with regard to co-sale rights, liquidation preferences, and governance structures. Early legal structuring increases exit capability and creates clarity for all parties involved. 

Would you like to make your investments exit-ready or are you facing a specific exit scenario? We advise venture capital investors on the structuring, negotiation, and implementation of exit strategies – legally compliant, pragmatic, and with an eye on your return targets.