A founder’s guide to the tender offer

Author: The Carta Team
Read time: 13 minutes
Published date: June 22, 2026

Learn what a tender offer is and how you can use one to provide liquidity for your shareholders, from the strategic benefits to the process for a successful transaction.

What is a tender offer?

A tender offer is a formal, company-sponsored secondary transaction allowing shareholders to sell a certain amount of their company stock at a predetermined price per share. It is a formal offer to purchase some or all of the shares in a corporation from existing stockholders, and is typically structured as an active and widespread solicitation by the company or a third party to buy a substantial percentage of the company’s securities. The buyer can be an individual investor, a group of investors, or the issuing company (in what’s known as a share buyback).

For public companies, the price per share is usually higher than the current market value to incentivize shareholders to sell. For private company stock, the offer price is typically determined by the company and any investors participating in the transaction. In some cases, the offer price may be equal to the company’s most recent 409A valuation.

Given the nature of these transactions, tender offers are often subject to internal agreements, government regulations, and other applicable securities laws.

How tender offers work for private companies

Since private company shares are not available on a public market, shareholders such as founders, employees, former employees, and early investors have limited opportunities to sell their shares. Private companies today are staying private for longer, meaning an exit event may be years down the line.

By allowing companies to provide a structured liquidity event for shareholders, tender offers have become a popular way to satisfy early investors and reward longtime employees. These transactions benefit multiple participants:

• Sellers can monetize their equity and realize returns without having to wait for the company to go public or get acquired.

• If the buyer is an investor, they receive equity in a company they want to invest in.

• If the buyer is the company, it can reduce share dilution while rewarding existing shareholders with liquidity.

Types of tender offers for private companies

There are two primary types of company-initiated tender offers: share buybacks and third-party tender offers.

What is a share buyback?

The primary goal of a share buyback is to provide employees and early investors with liquidity. Buybacks also have the advantage of being less administratively complex than a third-party tender offer. During a share buyback, you can use the cash on your balance sheet to repurchase the outstanding shares, or can use capital raised during a primary fundraise. The latter option is more expensive because it requires issuing new preferred stock to buy back existing common shares.

What is a third-party tender offer?

In a third-party tender offer, the investors have typically already engaged with the company and expressed their interest to purchase shares. Often, executives choose to hold a third-party tender offer if they know, based on investor demand, that an upcoming primary round will be oversubscribed. In these cases, the tender offer can allow investors to buy additional shares from existing shareholders.

How does a tender offer work?

While the process is governed by specific rules, a tender offer is a straightforward and manageable event when managed using dedicated liquidity solutions. The details can vary, but in general, the tender offer process looks something like this:

1. A buyer (or multiple investors) offers to purchase a defined quantity of shares at a set price

2. The company confirms the offer size and price and gets preliminary approval from its board of directors (BoD)

3. The company works with its legal counsel and the buyers to prepare the disclosures and transaction documents

4. A 20-business-day window opens for sellers to evaluate the transaction details, decide whether to participate, and if so, how many eligible shares they want to sell

5. Once the offer window has closed, allocations are finalized and sellers receive proceeds for their tendered shares

Under U.S. Securities and Exchange Commission (SEC) rules and the Securities Exchange Act of 1934, tender offers must remain open for at least 20 business days to allow sellers to ask questions, examine the documents, consult an advisor, and decide whether to participate.

Key participants and their roles

A tender offer involves several key parties, each with a distinct role. Understanding who is involved helps you navigate the ecosystem of the transaction.

• The company: As the founder or leader, you are the one who initiates and structures the event. You work with your legal and financial partners to set the rules, prepare the documents, and communicate the offer to your shareholders.

• The buyer: The buyer is the entity purchasing the shares. This can be the company itself conducting a share buyback, or it can be one or more third-party investors who want to purchase shares from existing holders.

• The sellers: These are the shareholders who are eligible to participate in the offer. This group typically includes current and former employees, as well as early investors who hold vested equity in the company.

• The agent: This is the platform and partner, like Carta, that executes the transaction. The agent manages compliance, handles shareholder communications, facilitates the movement of money, and updates the cap table to reflect the new ownership structure.

Tender offer rules and regulations

In addition to SEC rules, companies will often set qualifying criteria for participating in a tender offer—such as a vesting cutoff date (also known as a record date), eligible share classes for sale, and maximum sale limits based on a shareholder’s relationship type. This helps to ensure alignment with company or buyer goals for the liquidity event.

Tender offer example

Tender offers can go several different ways. Here’s an example of how a tender offer could play out for a fictional company, Meetly, and a fictional investor, Krakatoa Ventures:

1. Krakatoa Ventures offers to buy two million shares of Meetly’s common stock

2. Meetly’s latest preferred stock price is $50 and the fair market value (FMV) of the company’s common stock before the tender offer is $15

3. Krakatoa Ventures offers $40 per share, which Meetly’s BoD approves

4. The offer lasts for 20 business days

5. When the deal is completed, employees selling shares in the tender offer will receive their proceeds

How to prepare your company for a tender offer

A smooth and successful tender offer depends on the strategic decisions you make upfront. Founders and executives have several steps to take when structuring a tender offer for their company. Approaching this process with a clear plan will ensure that the transaction aligns with your company’s goals and minimizes potential complications.

1. Decide who will buy the shares

One of the first decisions is to determine the source of funds for the transaction. There are two primary structures for a tender offering: a share buyback or a third-party tender offer.

1. Corporate repurchases/share buybacks: In a share buyback, the company repurchases shares from its shareholders—including employees, investors, and/or former employees.

2. Third-party tender offers: In a third-party tender offer, the company allows investors to purchase shares from existing shareholders.

2. Set a transaction price

The offer price is a key component of the tender offer. If the transaction immediately follows a recent funding round, the price is often based on the price per share from that round; in fact, tender offer prices matched the company’s most recent preferred stock financing in 60% of deals in 2024. This provides a clear and defensible benchmark for the value of the shares.

• In a share buyback, the company sets the price it’s willing to pay for shares, and shareholders decide how many of their shares they’ll sell based on that price.
• In a third-party tender offer, companies set a transaction price based on investor demand before the offering period begins.

3. Decide who will be able to sell their shares: Establish transaction size and shareholder eligibility

In addition to pricing, eligibility parameters will set limits on the size of the transaction. For example, will this transaction be for current employees only, or will it include former employees? Will early investors be included? Eligibility will impact things like taxation for employees, as well as your company’s next 409A valuation.

4. Consider the tax impact to employees

The tax implications for participants in a tender offer (including employees) vary depending on the parameters of each transaction. Due to the complexities involved in structuring a tender offer and the related tax treatment, it’s important to discuss these considerations with your tax advisor, legal counsel, and auditors before you run the tender offer.

5. Understand the impact on your 409A valuation

A common misconception among founders is that holding a secondary transaction will cause a company’s 409A valuation to rise sharply and adversely impact future option strike prices. From Carta’s years of experience in the 409A and secondary liquidity space, we’ve learned that this isn’t necessarily true. Like some other secondary events, a tender offer will likely cause a 409A valuation to rise. But some companies find that it’s not a meaningful increase if they have put the proper controls in place around relevant factors, like the number of permitted participants.

Why run a tender offer?

As companies stay private for longer, the time between funding rounds has stretched to become the longest intervals this decade. In the second quarter of 2024, the median startup that raised a Series A round on Carta waited 774 days between primary funding rounds, and the median startup that raised a Series C waited 790 days after its previous round. With these extended timelines, providing liquidity for private company equity is no longer just a future exit plan—it has become an essential strategic tool for growth and retention. Running a tender offer moves beyond the "what" and addresses the "why" by speaking directly to your goals and challenges as a founder.

Employees: Should you participate in a tender offer?

Receiving stock options or restricted stock units (RSU) from your company is a great compensation perk. But most private stock awards are illiquid, meaning you can’t typically sell the stock you’ve earned for cash unless your company experiences an exit event—like an initial public offering (IPO) or a merger or acquisition (M&A). A tender offer is a way to access liquidity before an exit.

Pros and cons of participating in a tender offer

What happens if you don’t accept a tender offer?

You don’t have to participate in a tender offer. If you’d rather keep your shares, no action is needed.

How are tender offers taxed for employees?

Depending on the structure and parameters of the transaction, each seller’s proceeds may be taxed as ordinary income and/or capital gains. The tax consequences of participating in a tender offer will be summarized in your “offer to purchase” document, which also details the terms of the offer.

How Carta simplifies tender offers

Carta transforms the high-risk, manual process of a tender offer into a professional, streamlined experience that builds confidence for everyone involved. Our integrated platform offers liquidity solutions designed to handle the complexities of secondary transactions so you can focus on your company's goals.