Your company has grown up, but it is not done growing: pick the right next step.
Key takeaways
Public vs. private exit demands very different people, systems and planning.
Begin IPO preparation 12 to 24 months out; clean, audit-ready financials are the key.
By the exit stage, your company has grown in complexity, expanded its reach and matured. In a sense, you have reached a graduation point, though that does not mean the evolution is over. The questions now are strategic: Where does the company go from here, what form should it take to reach the next level and what is the exit plan? Going public or passing the torch is the heaviest lift yet, and in today’s market it is judged on profitable growth, clean financials, and a credible, well-prepared story.
What is the exit stage for a technology company?
The exit stage is when a mature technology company prepares for a major liquidity event, typically an initial public offering (IPO) or a private acquisition such as a sale to a strategic buyer or private equity. The work is part strategy and part readiness: choosing the right path, building the leadership and controls a late-stage company needs, and getting financials, systems and security in order before due diligence begins.
The trends reshaping the exit stage
Several forces shape how technology companies approach an exit today:
Profitable growth wins valuations: IPO and acquisition markets reward efficient, profitable growth and clean financials, not growth at any cost. Explore embracing capital efficiency.
Cybersecurity is deal risk: Acquirers do not want to inherit risk and a breach can sour an IPO, so strong security is now table stakes for any exit.
AI and automation shape readiness: Buyers and public investors scrutinize AI strategy and data, and automating rather than hiring incrementally is how you scale efficiently toward a much larger operation. See how technology companies are embracing AI.
Controls and systems must be audit-grade: Homegrown accounting systems rarely meet SOX-level internal-control requirements; enterprise systems and revenue-recognition discipline matter.
Key considerations for exit-stage success
Prepare for the next stage
Assess and articulate your strategic vision and a compelling investor story; both typically require a strong leadership team and good external advisors. Decide clearly between a public or private exit, since being “open to either” is not a viable plan. Recognize that financial maturity and management and infrastructure maturity are different things. If you have not already done so, level up to a chief financial officer (CFO) who can be the face of the company to investors and the market and who has navigated exits before.
Going public
Begin preparations 12 to 24 months before the planned IPO date. Very mature companies can move through the SEC S-1 process in six to nine months, but some need as long as three years. Be PCAOB-compliant and adopt all public standards, ensure proper auditor independence, and build the team and systems for Sarbanes-Oxley Act (SOX) compliance, since homegrown revenue and order-management systems usually fall short of the required internal controls. Start with our 5 tips for preparing for an IPO.
A private exit
A private equity changeover or acquisition as an add-on is less daunting than an IPO, but it is no small task. The challenge is finding the right fit and meeting the acquirer’s expectations, so consider how to streamline operations to appeal to a buyer and how you might upscale to fit into a larger business. Private equity often cares less about rigorous internal controls, but a clean historical bill of health still lets you tell a compelling, achievement-oriented story.
Maturity, ESG and security
A company mature in sales is not necessarily mature in process, infrastructure and management, so evaluate readiness even if an exit is not imminent. Weigh environmental, social and governance (ESG) factors, which can shape investor interest and public standing; automate as you scale toward a much larger operation; harden cybersecurity; and fill leadership gaps in the chief information officer, chief information security officer and chief technology officer positions, plus secure a strong controller or chief accounting officer.
You can’t control the market, but you can control your financial health. With an exit, preparation is everything.
Eliot Mitchell, Director, Business Risk Consulting and ESG Risk and Controls Leader, RSM US
Explore the 4 stages of the technology company lifecycle
How RSM helps technology companies prepare for an exit
RSM works with technology companies through the most demanding stage of all, combining assurance, tax and consulting, including assistance in the following areas: IPO readiness and SOX, audit and GAAP, Mergers and acquisitions and transaction advisory, value creation, and risk and cybersecurity. This page is part of the scaling your technology company lifecycle and follows the expansion stage; for the current market picture, see the technology industry outlook.
Frequently asked questions
It is the late, mature stage when a company prepares for a major liquidity event, such as an IPO or a private acquisition (a strategic sale or a private equity deal). The focus is strategy and readiness: choosing the path and getting financials, controls, systems and security in order before due diligence.
It depends on your vision, your story, your history and your team. An IPO offers scale and access to public capital but demands extensive preparation and compliance with PCAOB and SOX requirements. A private exit is less onerous but hinges on fit and meeting an acquirer’s expectations. Being open to either is not a plan.
Plan to begin 12 to 24 months ahead. Extremely organized companies with mature infrastructure can complete the SEC S-1 process in six to nine months, but some need as long as three years, so the earlier the preparation, the better.
SOX compliance requires public companies to maintain rigorous internal controls over financial reporting. Many tech companies rely on homegrown revenue and order systems that cannot meet that bar, so building compliant systems and controls is essential for exit readiness.
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