How have perceptions of private company liquidity transactions changed in recent years?
Although 57% of private companies say their ultimate goal is an IPO, according to the Morgan Stanley at Work 2026 Liquidity Trends Report, the trend of staying private longer has caused a structural shift that is driving companies to use tender offers and secondary transactions as core pillars of their talent strategy. As a result, company-sponsored liquidity events have evolved from standalone transactions into repeatable programs that give leadership teams the control to reward employees and other stakeholders with real dollars at regular intervals in advance of a potential IPO.
As the approach to liquidity events matures, companies can now decide how they want to offer liquidity to their employees and other stakeholders. This has seen companies combining their primary capital raises with tender offers and using them to provide access to value while maintaining strategic flexibility on the path toward going public.
At the same time, companies that authorize secondary sales are looking for orderly ways to support their employees’ one-off liquidity needs in between tender offers. Depending on transfer restrictions, many individual sellers can now trade pre-IPO shares through secondary marketplaces. These secondary sales allow shareholders to unlock the value of their private equity on their own timeline.
What execution risks should companies consider when navigating tender offers?
While the market has evolved in recent years, both in terms of technical developments and infrastructure improvements, tender offers remain complex. To avoid unanticipated bottlenecks, companies need sufficient legal and finance team capacity. Similarly, disorganized cap tables could result in transaction delays and increase administrative costs. Uncertainty about how to handle different types of awards or structures, such as double trigger restricted stock units (RSUs) or cashless exercises, can create operational and compliance risk. Misunderstanding the tax implications of a liquidity event can also introduce unexpected costs and liabilities for both the company and participants.
What steps can companies take to mitigate those risks?
First, companies should establish strong partnerships with their external legal team and auditors to make sure the decisions they make are aligned with best practice. As just one example, the Securities Exchange Commission (SEC) recently introduced new rules that reduce tender offer repurchase windows from 20 days to 10 days for certain qualifying transactions. This accelerated timeline can help mitigate exposure to market risk and create more flexibility for recurring liquidity programs. However, without appropriate legal and tax structuring, it can also increase execution risk.
Second, companies should work with their equity plan provider to get transaction-ready. Morgan Stanley at Work offers a robust transaction readiness program to help platform users audit their data to confirm the accuracy of ownership and demographic data, put the right systems in place to streamline workflows, manage legal and tax compliance requirements, and keep shareholders informed with access to both ongoing educational resources and event-specific guidance.
Third, it’s important to understand market trends and ask for peer references before engaging in a liquidity event.
The bottom line is that tender offers and bilateral secondary trades require thoughtful preparation. When it comes to tender offers, this generally means developing communication guidelines, managing equity administration, consulting with legal and tax teams, considering investor relations, and clarifying how to celebrate this milestone without sending unintended performance signals. And while bilateral secondary trades may not require equivalent resources, advance planning is still key for companies seeking to maintain control, simplify their cap table, and mitigate risk.
If an IPO is the eventual goal, what should management teams think about when setting tender pricing or negotiating secondary transaction pricing?
For private market tender offers, the easiest pricing reference is often last round or a slight discount to the last round. However, pricing can shift from that baseline the longer a company stays private and the longer they wait to raise a primary round or share information with the market. On the one hand, buyers uncertain about IPO timing may expect higher risk-adjusted returns, which could translate into lower transaction prices or steeper discounts. On the other hand, more frequent secondary transactions generate more market-based data points, which allow for dynamic pricing adjustments.
Either way, liquidity event pricing could influence future valuation expectations and investor perceptions. Pricing too high could lead to investor disappointment if IPO valuations seem to drop. Conversely, pricing too low could dilute existing shareholders’ value and potentially raise questions about the company’s governance practices. The goal, then, is to create as much optionality as possible by balancing near-term liquidity pricing with a credible future valuation narrative.
