Entrepreneurial Finance: Strategy, Valuation, and Deal Structure

Learning Objectives

After reading this chapter you should be able to:

• Understand how early-stage investors can harvest their investments by going public

• Describe the role of the investment banker in the initial public offering process, including the due-diligence, certification, and marketing functions of the underwriter

• Explain how an underwriter values a new issue and how the valuation evolves as the time of the offering approaches

• Describe the ways in which private acquisition transactions can be structured and identify some of the factors that affect the choice of structure

• Understand when and why an entrepreneur might decide to undertake a management buy-out of outside investors.

• Understand how an ESOP creates liquidity for the owner of a business that is not public and explain how a leveraged ESOP works

• Describe how roll-up IPOs enable small companies to go public

• Identify the main factors that affect the choice of harvesting alternatives