- Short Description:
- A dual-track is when a company works simultaneously on conversations about selling the company completely and preparing for a financing round (or IPO or direct listing).
- Benefits:
- Many times the best deals happen when there are urgency and a clear and attractive alternative. If the alternative to being purchased is a clear credible plan to go public, it can motivate a buyer.
- While the price for the acquisition will be influenced by the acquirers’ expectation of the valuation for IPO or financing, the acquisition offers can also serve as a double-check that the financing valuation is sufficiently high to be attractive.
- While the board may be ready to sell the company, some key executives including founders may want to continue running an independent company. If that is the case, a dual-track can help those people see that the sale will be more attractive (depending on the offers).
- Trade-offs:
- It can be more work to do the work of preparing for being public and to sell the company.
- There is a risk in sharing information on the company with potential competitors. If the company has a very high chance of turning down any acquisition offers, then it may not be worth sharing that information.