What Is a Tender Offer? A Guide to Private Company Liquidity for Tech Professionals
If you work in tech and hold equity in a private company, you may one day receive a tender offer - an opportunity to sell some of your shares before an IPO or acquisition. With many companies delaying public offerings and staying private longer than ever, tender offers have become a key liquidity strategy for startup executives, employees, and early investors.
But what is a tender offer, how does it work, and how should you evaluate whether to participate? In this guide, we’ll break down the essentials and share how tech professionals can approach these offers strategically.
Understanding the Basics: What Is a Tender Offer?
A tender offer is a formal opportunity for private company shareholders, typically employees or early investors, to sell some of their shares at a pre-set price, within a limited window of time. These offers are usually initiated by the company itself or an external investor who wants to increase their ownership position.
Unlike in public markets where you can sell shares anytime, a tender offer is a controlled and infrequent liquidity event. The company sets the terms of the sale: who is eligible, how many shares they can sell, and at what price. This is often part of a broader fundraising round, with investors purchasing common shares directly from employees instead of (or in addition to) buying preferred shares from the company.
Why Companies Offer Tender Opportunities
Private companies typically launch tender offers to give employees a chance to realize some value from their stock without waiting for an IPO or acquisition. Liquidity boosts morale, helps with employee retention, and allows the company to remain private longer.
In some cases, the offer is driven by investor demand. VCs or secondary funds may want a larger stake and are willing to buy shares from existing shareholders. The company benefits by controlling the process and avoiding fragmented secondary transactions on the open market.
Tender offers can also help consolidate the capitalization table, allowing long-term-aligned investors to replace early employees who are ready to move on.
Who Can Participate in a Tender Offer?
Eligibility for a tender offer depends on the terms set by the company. In most cases, current employees with vested shares can participate, and former employees or founders are often included as well. The offer may also be limited to certain classes of shares - often common stock, and participants are typically restricted to selling a fixed percentage of their holdings, such as 10–30%.
It’s important to review the offer documentation closely, including the offering memorandum and any FAQs. These documents outline the price per share, eligibility criteria, key deadlines, and other legal terms. If you’re unsure what you're allowed to sell or what the tax implications might be, this is the time to ask questions or bring in a professional to review the details with you.
What to Consider Before Accepting a Tender Offer
Tender offers can be compelling but they’re not always the right move. Each situation is unique, and there are several key factors to weigh before committing.
One of the most important considerations is price. How does the offer compare to the company’s latest valuation? Is the price per share compelling enough to justify selling now, or do you believe the company’s future growth will generate a better return?
You’ll also want to consider how many shares you’re allowed to sell. Most companies limit participation to a percentage of your total holdings, so even if you’d like to liquidate more, you may be constrained. Depending on your personal financial situation, selling a portion could provide meaningful liquidity without giving up too much future upside.
Tax Implications of Tender Offers
Taxes can significantly affect your net proceeds from a tender offer. If you’re exercising and selling stock options, the type of option - Incentive Stock Options (ISOs) vs. Non-Qualified Stock Options (NQSOs) - matters. ISOs that don’t satisfy the long-term holding requirements will trigger ordinary income taxes rather than more favorable long-term capital gains. With NQSOs, gains are generally taxed as compensation at ordinary rates upon exercise.
If you already hold stock and are selling it directly, the length of time you've held it plays a major role. Shares held for more than one year will qualify for long-term capital gains treatment. Furthermore, if your shares meet the requirements for Qualified Small Business Stock (QSBS), you may even be able to exclude up to $10 million in gains from Federal income taxes entirely.
Given these complexities, working with a tax advisor or equity planning specialist is essential before committing to a tender offer. Small changes in your equity history or timing can lead to large differences in tax outcomes.
Should You Sell Your Shares?
Participating in a tender offer is ultimately a personal decision that depends on your goals, financial needs, and conviction in the company’s future.
Some questions to reflect on:
Do I need liquidity for personal expenses, a home purchase, or to bring my overall portfolio in line with my ability to take risk?
How concentrated am I in this one company’s equity?
Am I optimistic about the company’s valuation increasing in the next few years?
What is the tax impact if I sell now vs. hold?
In our work with clients, we often find that selling a portion of available shares, which is usually already limited by the tender offer, can strike the right balance. This allows you to take some money off the table, gain financial flexibility, and still retain exposure to potential upside.
Planning for What Comes Next
If you do participate in a tender offer and receive a significant cash payout, it’s worth pausing to think about how that liquidity fits into your larger financial picture.
You may want to:
Top up your emergency fund
Reinvest proceeds into a diversified portfolio that aligns with your long-term goals
Fund a Donor Advised Fund (DAF) for tax-advantaged charitable giving
Consider exercising additional options to capture more future upside
Finally take that vacation you’ve been putting off or invest in something that supports your well-being
Tender offers can serve as a catalyst and motivation for strategic financial planning, not just a one-off liquidity event, but a trigger for building a more intentional and tax-efficient financial plan.
How Our Firm Helps Tech Professionals Navigate Tender Offers
At Citrine Capital, we specialize in equity compensation and liquidity planning for tech professionals. Our team has deep experience helping startup executives and employees analyze tender offer terms, model after-tax outcomes, and make confident decisions about how much to sell.
We act as your sounding board, helping you evaluate opportunities, minimize taxes, and strategically reinvest proceeds in ways that align with your goals. Whether you’re considering your first tender offer or you’ve experienced several liquidity opportunities, our guidance helps you navigate with clarity and confidence.
Final Thoughts: Tender Offers as a Milestone, Not a Finish Line
For many tech professionals, a tender offer marks the first time their equity becomes real money. But it’s not just about cashing out—it’s about making a thoughtful decision that fits your financial life and future.
If you’ve been offered the chance to sell private company shares and aren’t sure how to evaluate it, we’re here to help. Reach out to start a conversation about how to make the most of your equity and make smarter decisions along the way.
About The Author
Jirayr Kembikian, CFP® is a wealth advisor, managing director and co-founder of Citrine Capital, a San Francisco-based wealth management and tax planning firm serving tech professionals, founders, and business owners. He specializes in navigating the complexities of equity compensation, private investments, and Bitcoin wealth strategies. With over a decade of experience guiding clients through liquidity events and complex financial decisions, Jirayr brings a grounded yet forward-thinking perspective to building and preserving wealth.