Venture Capital Trade Sales: Introducing the Acquirer's Perspective on Venture Capitalists' Non-Financial Value-Added
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Research on venture capital has by large concluded that the venture capitalist (VC) adds non-financial value to his portfolio firms. The vast majority of venture capital exits are trade sales; and trade sales involves an acquirer spending a lot of effort on evaluating the portfolio firm. The acquirer has however not been given a voice in the research on the non-financial value created by the VC. This thesis contributes to research on venture capital by introducing the acquirer’s perspective on how venture capitalists can add value to their portfolio firm. The thesis is paper based, with the main academic contribution inherent in the appended papers. The reader will be introduced to the field of research through an opening document. Paper one is based on a thorough literature review of both VC NFVA and M&A research and interviews with nine seasoned M&A actors. Paper two and three are based on three case studies of Norwegian trade sale exits, with the VC, the CEO and the acquirer as embedded units of analysis. Paper one takes the first step to develop the acquirer’s perspective by combining literature on the acquirer’s due diligence (DD) process and empirical evidence from DD on entrepreneurial firms. The paper indicates how the VC can add non-financial value from the acquirer's perspective. Paper two explores how the VC can create value for the acquirer through activities concerned with the motivation of the new venture team (NVT) to be acquired. The VC should keep a stern focus on both the intrinsic and extrinsic motivation of the NVT to create value from the acquirer’s perspective. Paper three looks closer at how the VC’s effort in professionalizing the portfolio firm’s standard of formal reporting systems and routines may contribute in reducing the risk associated with a trade sale. The VC should put in place formal control systems and routines to create value from the acquirer’s perspective. These papers have taken important steps to increase the understanding of how an acquirer values the efforts of the VC in a trade sale. This study is the first of its kind, and future researchers should continue to take use of the acquirer’s perspective to create a more nuanced picture of how the VC can add non-financial value.