From IPO to M&A: Analyzing the Strategic Shift in VC Exit Dynamics (2021–2022)

Geunyoung Choe, Purdue University Northwest, 2200 169th Street Hammond, IN 46323, United States
Keewon Lee, Harrow School, 5 High Street Harrow on the Hill, Middlesex HA1 3HP, United Kingdom
Volume11 nos.1 September 2025 ISSN 2755-3272

Keywords

Venture Capital; Initial Public Offering (IPO); Merger & Acquisition (M&A); Special Purpose Acquisition Company (SPAC); Exit Dynamics

Abstract

The U.S. venture-backed IPO market experienced a dramatic shift between 2015 and 2024, peaking in 2021 and declining in 2022 due to Federal Reserve interest-rate increases. The research uses Pearson correlations to analyze the relationship between IPO activity and four market elements including SPAC issuance, the M&A share of exits, interest rates, and stock-market volatility through a ten-year data collection period. The data indicates that IPOs increased with SPAC market activity (r ≈ +0.88) but decreased when acquisitions became the primary exit method (r = –0.96) because founders view these channels as interchangeable. The study shows interest rates have a moderate negative relationship with IPOs (r ≈ –0.54) yet equity market volatility provides minimal explanatory power (r ≈ +0.20). The research demonstrates that companies need to keep both IPO and M&A options available while regulatory clarity affects SPAC market performance. This study demonstrates exit market flexibility through its annual data analysis, yet further research using higher-frequency and cross-country data is needed.