Seventh Annual IBA European Start-up Conference, Stockholm: report on panel session: ‘To list, to sell or to flip to the US: succesful exit methods in Europe’

Daniel Liemberger
Kunz Wallentin, Vienna 
Daniel.liemberger@kunz.at

The interview between Adam Kostyal (NASDAQ), Francesca Porte (experienced general counsel/PolyAI; formerly Onfido) and moderator Mike Labriola (Wilson Sonsini) focused on the challenges and strategies involved in initial public offerings (IPOs), capital raises and company sales, with a particular emphasis on the differences between European and US markets.

Market conditions for IPOs

Adam Kostyal highlighted that the IPO market has faced challenges in recent years, especially following the boom year of 2021, which saw a record-breaking 150 IPOs in the Nordics. Despite a strong IPO pipeline today, there are significant hurdles, particularly for small and medium-sized enterprises (SMEs). A key issue is the gap in valuations: sellers aim for the high multiples seen in 2021, while buyers expect lower prices.

The Nordic region, however, has a robust ecosystem for smaller IPOs, supported by broad equity participation among households, public pension funds, and institutional investors. Across Europe, a unified structure to systematically support smaller IPOs is still lacking. The EU’s focus on capital markets union could change this in the long term. Overall, Adam views the Nordic IPO market as stronger than other European regions.

Challenges in the US market

While the US market is often seen as an attractive target for European companies, it is not a realistic option for many. Adam explained that companies with a strong US presence and substantial capital requirements may have opportunities, but the US IPO market has also struggled in recent years. Moreover, European companies often need to meet stringent requirements, such as a minimum market capitalisation of €5bn, to succeed in the US. Many European firms, particularly in the tech sector, fail to meet these thresholds.

Insights from practice: Francesca Porte

Francesca Porte shared her experience at Onfido, a company that weighed IPO preparation against the possibility of a sale during its growth phase. Initially, Onfido planned for an IPO and began preparations, including improving compliance structures, appointing independent directors, and establishing governance committees. However, as growth slowed, the market became more competitive and sector consolidation began, the company ultimately opted for a sale instead of an IPO.

Francesca emphasised that the preparations for an IPO – such as optimising the cap table (ownership structure) and building internal processes – were invaluable for the sale. She highlighted challenges such as managing complex investor structures, incomplete cap tables and legal liabilities (eg, class-action lawsuits) that can jeopardise processes if not addressed early.

One of her biggest lessons was the importance of creative solutions and strategic advice from external counsel. In one case, the company had to secure insurance to mitigate uncertainties in the cap table. Support from advisors who offered both legal and strategic guidance was critical to successfully navigating the sale process.

Dual-track strategy and preparation

Adam stressed the importance of the so-called ‘dual-track’ strategy: companies should prepare for both an IPO and a sale, as one often serves as leverage for the other. A prime example was PayPal’s acquisition of Swedish iZettle. The company was nearly ready for its IPO when PayPal made an attractive offer. Without the IPO preparations, this sale might not have materialised.

Adam and Francesca agreed that preparing for an IPO or sale requires a comprehensive overhaul of company structures. Key elements include:

• ap table management: regularly cleaning up ownership structures to reduce complexity;
• financial stability: ensuring predictable financial results, especially for the initial quarters after going public;
• advisors and experts: building a management team and legal advisory group with the right expertise; and
• investor communication: engaging with potential investors early to understand their expectations for key performance indicators and strategy.

Comparing Europe and the US

A central point of discussion was the maturity of the European market compared to the US. Adam criticised that many European companies are unprepared for regular secondary market transactions. These are critical for providing liquidity to employees and early investors while optimising ownership structures. In the US, this is standard practice, often supported by platforms like Nasdaq Private Market.

Francesca noted that European companies often lack long-term planning. For instance, Phyto’s failure to maintain its cap table led to delays and a loss of trust among investors. She called for a cultural shift to enhance the maturity of European companies and promote long-term strategies.

Role of legal advisors

Francesca highlighted that external lawyers should provide not just legal expertise but also strategic and human-centric support. During challenging moments in the sale process, creative solutions to issues such as unfair employee equity treatment or valuation discrepancies were vital. Centralising legal services and billing across multiple countries was also seen as immensely valuable.

Nasdaq and secondary market strategies

Adam underscored the importance of secondary market platforms in providing liquidity to employees and early investors. This regular liquidity can improve valuations and stabilise ownership structures. Nasdaq Private Market allows companies to upload their cap table and control who buys or sells shares, at what price, and under what conditions. This approach, common in the US, is still underutilised in Europe, where companies often wait for a major liquidity event that may never materialise.

Conclusion

• The interview underscored that IPOs and company sales are not just technical processes but require strategic planning, market knowledge, and strong relationships. Europe’s market must mature further, especially in areas such as cap table management, secondary market transactions, and investor expectations. At the same time, creative and collaborative legal counsel remains a key success factor.
• The European market still faces the task of further professionalising its processes and structures in order to catch up with the USA.