IPOs vs. M&As

When determining whether an IPO or M&A is the best exit strategy for your startup, it’s important to weigh the pros and cons of an exit.

• IPOs can unlock liquidity and provide significant access to capital. They can also enhance a company’s brand and market position. IPOs may help companies scale by attracting customers, employees and collaborators. However, operating as a public company adds the pressure of regular reporting, fluctuations in share price and additional regulatory requirements, which can be costly and limit founders’ control.
• M&A can help companies grow rapidly by expanding to new geographies and adding revenue, clients, products and capabilities, driving up average contract value. M&A can carry additional costs, regulatory scrutiny and execution challenges. Companies may also struggle to integrate systems, people, culture and processes.

But these benefits and drawbacks don’t exist in a vacuum, so they should be evaluated within the context of the macroeconomic and exit landscape.

The current IPO and M&A landscape

M&A accounts for over 85% of VC-backed exits in the last five years, according to the J.P. Morgan 2025 State of the exit market report: Europe, Middle East and Africa. The report also showed that Only 2% of EMEA-based VC-backed companies exited through IPOs in 2025.

“There has been a huge wave of VC investment since 2021—most of which has yet to exit—so we expect to see a step change in M&A from VC-backed companies,” Mose Adigun, Head of EMEA Tech M&A.

“A small number of VC-backed companies that have been on the IPO track will see windows opening for an IPO in in the coming years,” Gregoire Pennec, Head of EMEA Innovation Economy M&A. “For everybody else, M&A is the most likely exit route.”

“While some companies have publicly delayed their IPOs, the recent IPOs of Circle, Coreweave, Figma and Klarna show that the IPO market is starting to open up and the VC world is cautiously optimistic,” Tickler said. 

Macroeconomic trends

“Macroeconomic pressures, geopolitical tensions and trade wars have all played into uncertainty and a relative drought of tech IPOs,” Tickler said. 

Factors include ongoing geopolitical tensions, especially in the Middle East. U.S. threats to impose tariffs on European Union imports have heightened market uncertainty.

Meanwhile, the European Central Bank and other regional central banks are navigating inflationary pressures and interest rate decisions. These monetary policy decisions influence borrowing costs and investor confidence, directly affecting IPO timing and viability.

Market trends

Several broader market trends are also driving exit activity. There’s significant dry powder in the market, and on the other side investors face pressure for distribution to paid-in capital, creating a long pipeline of portfolio companies seeking monetization. 

Other M&A trends impacting innovation economy companies include:

• Pressure to exit due to short cash runway or lack of growth: Many scaleups last raised capital during the 2020-2021 equity bubble, when interest rates were at record lows globally and valuations were significantly higher. Since then, raising new capital has become more difficult, limiting cash runways and forcing companies to seek exits or sales.
• Using M&A to stay competitive: Many established companies use acquisitions to target new customer bases, enter new geographic markets and enhance technology capabilities through AI, big data and IoT startups—faster than organic development would allow. This ties into a broader trend of platformization where companies seek to offer more value to their clients and enhance stickiness over time.
• Making opportunistic exits: With more potential acquirers—and a wider range of them—opportunistic exits are on the rise. These options include private share sales that offer liquidity without the need for public offerings, continuation funds and private IPOs, which allow buyout firms to return capital to investors while maintaining the opportunity for long-term investment.

Developing an exit plan

It’s important to develop your exit plan early on. “Almost all entrepreneurs will have a mission statement and vision, which will ideally then feed into their strategy,” Tickler said. “Sometimes they will see that can be fast-tracked or enhanced through a financial sale or collaboration with a strategic party.” 

“For venture-backed companies, investors will also have clear views on an exit based on their fund and potential returns,” he said.

6 steps European startups can take to prepare for acquisition

There are several ways European growth companies can make themselves attractive acquisition targets.

1. Focus on establishing a solid foundation while sustainably growing your business. There are many tasks to juggle and some companies focus too much on areas that don’t add value to the business. “Don’t get distracted from building a great product, business, IP and client base as that will ultimately be what is attractive to buyers,” Tickler said.
2. Strengthen your management team and grow the board to prevent overreliance on the founder or a few key individuals. For example, your company may want to add a CFO or legal counsel with exit experience. Companies aiming to go public may find adding an investor-relations manager beneficial. Likewise, companies seeking to identify and negotiate an acquisition should consider adding a corporate development or M&A specialist. 
3. Streamline operations and build out systems by implementing software tools and processes across the business. This includes employee and client onboarding, ERP improvements for HR and payroll, CRM for sales and marketing, and accounting and financial tools for reporting and budgeting. It’s also critical to have standard operating procedures and KPIs. These tools and systems adhere to legal and regulatory requirements. “By embracing automation and AI as your company scales, you can build efficiency and lower the cost to serve at scale,” Tickler said.
4. Establish a well-run financial operation, financial model and business plan, including efficient resource and cash-flow management, such as effective budgeting, cash forecasting and reporting. Keep your data room up to date and have a clear vision and plan for how you sell the current success of the business and the long-term vision.
5. Understand potential business risks, which can be wide ranging. These include operations, client concentration, compliance issues and threats to the company’s brand and reputation. Perform scenario analysis to evaluate the impact of different business decisions and external factors on their financial health. Make sure to incorporate these concerns and mitigation strategies in your business plan.
6. Proactively establish and grow relationships with potential buyers. You should also market map the industry and make sure the founder and board build relationships with key players in each part of the network. “It’s important to cultivate relationships with a curated list of strategic and financial investors that spend time in the sector well before an exit is on the cards,” Adigun said. “Finding the right partner for the next phase of the journey is an important part of achieving a successful exit.”