The evolving landscape of private market equity and liquidity

Among private companies, equity remains an important tool for aligning business goals with employee goals and attracting and retaining talent. At the same time, 99% of private company decision-makers agree that they can expand the value of their stock plans by providing liquidity options for employees, according to our 2025 Liquidity Trends report. 

Based on what we hear from clients, there are likely several reasons for this. First, many companies continue to stay private longer, creating demand for pre-IPO liquidity, particularly among employees and early investors. Second, even though larger and late-stage private companies are increasingly considering an exit strategy-with 45% saying an IPO is the goal-there is a consensus that putting off a liquidity event for too long can lead to potential challenges. For 39%, their next liquidity event is most likely to be a tender offer,¹ particularly given the benefits of doing so. These include attracting and retaining talent, managing dilution during or after fundraising, and exercising control over which shareholders take positions on the cap table. Additionally, 56% of the companies intending to raise capital while still private plan to combine that raise with a liquidity event. 

While every company is likely in a different position, it is important to be proactive with your liquidity strategy. You may ask yourself: What are the goals of my liquidity program? Is it employee retention, bringing on a strategic partner, or satisfying excess investor demand? Does my company have expiring equity awards? 

The biggest considerations for a successful transaction are usually identifying demand and supply, and understanding how the structure could potentially impact eligible sellers. Key questions to consider: Who is going to buy the shares? Will it be a company buyback or a third-party purchaser? What valuation will the transaction take place at? Who is going to be eligible to sell? What percentage of shares should stakeholders be eligible to sell? What are the different tax and accounting treatments for each structure? Planning for all these considerations can help companies drive better outcomes. 

Companies should also prepare to address unique shareholder situations that may require attention. Companies choosing to stay private longer, for instance, may encounter issues with expiring awards. Several of our late-stage private company clients have shareholders with double-trigger restricted stock units (RSUs) that will not vest until the second trigger-typically an IPO-occurs. To resolve this, some companies remove the second vesting trigger so that RSU shares are issued to individuals at each vest date. Other companies remove a portion of the double-trigger vesting requirement to allow a subset of the RSU award to vest ahead of a large liquidity event. In both cases, we see private companies follow RSU releases with a liquidity program like a tender offer. 

With these considerations, at least 80% of private companies say they feel some pressure to facilitate a liquidity event.² While tender offers remain popular, roughly 33% of private companies feel unprepared to conduct a liquidity event.³ Top concerns are related to valuations, regulatory requirements, event administration, and failing to execute an event as desired. 

Tender offers, IPOs, and other liquidity events take a lot of time and planning. They also tend to be dynamic events, where deal structure is iterative until closer to the event launch date, when everything comes together. 

The more companies proactively focus on transaction readiness to build an infrastructure for equity programs that can support the dynamic nature of these events, the better the chance of avoiding costly delays during the transaction process. Proactively aligning internal and external stakeholders on the strategic business goals, potential timeline, terms, and legal and tax implications of a future liquidity event can help ensure that they are ready when the opportunity is ripe. 

The overall success of equity and liquidity programs can depend heavily on how well employees understand the value of receiving equity and how it may impact their financial future. While over 50% of companies prepare for liquidity events by updating their cap table, engaging external partners with liquidity event experience, and defining their strategic goals for the event, only 31% develop an education program in advance.⁴ Beyond impacting participation rates, this could add complexity during the event if employees and shareholders lack access to the information needed to make informed decisions. 

Having a strong liquidity strategy can align the incentives of your employees and investors with the company's overall business goals. This is something that Morgan Stanley at Work can help you with, regardless of your company's size or stage.