Making Acquisitions with Public Equity

About the Episode

In this episode, we talk with Irving Kau about how public equity is used to acquire companies in the private sector. We discuss why public equity is used to acquire companies, the advantages and disadvantages of doing so, and whether you, as a business owner, should consider accepting public equity as a form of consideration when selling your company. We also discuss the intersection between the private markets, venture capital, private equity, and the public market. We delve into the mechanics of using public equity, both as a buyer and a seller, whether you should consider this strategy, and how this strategy is used by different participants and in different economic environments.

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In this Episode

1:20 What does it mean to acquire companies using public equity?
4:15 Why is there a focus on NASDAQ?
5:40 Why would a venture capitalist choose to keep a company private?
9:20 Who uses public equity to acquire companies?
13:40 What are the mechanics of using public equity to acquire a company? How does it work?
14:45 What is restricted stock?
17:00 To what extent is the company integrated?
21:10 How often is debt used in combination with public equity to acquire a company?
24:20 How often does the purchaser require the owner and management team to stay after the transition?
25:30 How open are most sellers to receiving equity in another company?
27:00 How soon can the seller liquidate the (restricted) stock?
28:00 Is board approval required?
28:40 Is shareholder approval required?
30:10 How does the market react when a company uses equity to acquire another company?
31:00 How do companies communicate with their investor base?
32:05 What does a typical investor base consist of for a tech company?
34:30 Can using public equity change your acquisition strategy?
35:40 Don’t most sellers require a minimum amount of cash down?
36:20 How does this strategy change in different economic times?
37:15 How do you think this strategy will change in the future?

Highlights

  • The U.S. equity markets are more forward looking, as opposed to other international stock markets, which helps lay the groundwork for investment in small-cap, speculative companies.
  • The investor base is different in Europe than the USA.
  • NASDAQ has a much different investor base than the other stock exchanges.
  • Valuing high-growth companies is more art than science and is highly subjective.
  • Selling your company and accepting stock from the acquirer is not necessarily an exit.

Learn More

Resources Mentioned

Meet Our Guest

Irving Kau

Irving Kau

Managing Partner at KW Capital Partners,, Elementz Ventures, Focus Universal Inc.

Mr. Irving Kau is a detail-oriented, global leader focusing himself on follow-through, execution, and task completion. He has extensive experience working in both global public equity and global private equity, specifically in conjunction with Asia Pacific-based companies. During his career, he has worked on the buy-side, sell-side, and company side.

With a background both in finance and science, while publishing several peer-reviewed academic papers, Mr. Kau has the ability to understand the technical considerations of financial, management, and advisory work within many natural science related industries. In addition to hard work, Mr. Kau deeply values character and ‘doing the right thing’ in each and every circumstance as a long-term perspective, despite any potential short-term effects.

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