Trade Sale

Trade sales are a common way for business owners, private equity firms and venture capital investors to exit their investments. The buyer is typically a strategic buyer, such as a competitor, supplier, customer or company seeking to expand into a new market.

For example, a venture capital-backed software start-up might be sold to a large technology company that wants to add its product to its range. The investors and founders receive cash, shares or both.

Strategic buyers can often pay higher prices than financial buyers, because they expect synergies from combining the businesses. Trade sales can also be faster and simpler than a stock market listing, and allow sellers to exit fully rather than gradually.

Disadvantages can include the loss of the company's independence, possible job losses as the business is integrated, competition authority reviews and the need to share sensitive information with competitors during the sale process. The term trade sale is especially common in the United Kingdom and Europe; in the United States, it is more often called a strategic sale.