Legal Considerations For A Successful Exit Strategy in 2025

While we entered 2025 expecting an increase in exits this year, the lingering uncertainty is likely to spell another year of lower deal activity. It’s not that there’s no room for deals – it just means that founders must be more strategic in their exit strategies. One crucial aspect of this is improving legal hygiene in the lead up, since we’re seeing more investors treating compliance issues as deal breakers than risk factors in the current climate.   

In this post, we explore general market trends in exits that we’re seeing so far in 2025, as well as how legal considerations play into exit strategies in the climate of uncertainty. We end this post with an actionable list of steps founders can take to improve their legal hygiene in advance of an exit to tell a compelling exit story. 

General Market Trends We’re Seeing at CGL 

It’s no secret that the dealmaking and IPO landscape has been a little flat since the mountainous highs of 2021. And while reports through 2024 expected elevated activity this year, tariff uncertainty and inflationary pressures have put the brakes on expectations – at least for now. (Although, Turo’s recent withdrawal from the IPO pipeline hints that this lull may be longer than just a few months). 

A More Strategic Approach to Exits 

In response, we’ve noted that the market is showing a more strategic approach to exits in 2025. Over the past 12-24 months, we’ve seen companies spending longer in the private markets before pursuing public offerings. These companies are spending that time developing sustainable unit economics to better position themselves for future growth and ensure their products/services are profitable and in-demand at scale.  

A Longer ‘Readiness Window’ 

It’s also becoming more common for companies to start preparing 18-24 months before a targeted exit, rather than the 6-12 month window we saw previously – in particular during the highs of dealmaking in 2021. These companies are pursuing formal readiness assessments and seeking to improve legal compliance much earlier. In the context of legal counsel, we’re finding more companies recognizing the ROI on integrating compliance into operations earlier, instead of as a ‘bolt-on’ to get ready for an exit.  

Making Sense of The Trends 

Put together, the trends emphasize a move towards building (and demonstrating) long-term value that holds up in a more turbulent economy. A strategic exit in 2025 or beyond will demand a strong ‘exit story’ built on a solid legal foundation.  

Those looking to exit will need to present a compelling narrative, alongside robust documentation that passes more thorough due diligence. It will also likely require a more compelling showing of ‘future-readiness’, which is why we’re seeing more venture-backed enterprise SaaS companies pausing their IPO plans to focus on geographic expansion and strategic acquisitions before exiting potentially later this year or in the coming years.  

Legal Risk Mitigation to Exit in Uncertain Economic Conditions  

The current exit environment requires proactive legal strategies, particularly around: 

1. Cap table hygiene and option pool management. We’re seeing issues with early documentation coming back to haunt companies at exit, including early documentation errors such as dead equity, incorrect vesting schedules and missing option grants. A clean cap table demonstrates good governance and fosters investor confidence, and it’s essential for a strong exit strategy in 2025. 
2. Intellectual Property (IP) ownership and third-party dependencies. Ambiguity surrounding ownership can significantly devalue a company. In other words, IP ownership is critical to address before due diligence. This requires thorough IP audits, clear and documented assignments of ownership, and license agreements for any third-party dependencies, including open-source and proprietary software and any Application Programming Interfaces (APIs).  
3. Privacy and cybersecurity compliance. Given the high costs for non-compliance and data breaches in recent years, privacy and cybersecurity hygiene has become a deal-breaker rather than just a risk factor in dealmaking. Companies are expected to have robust data protections in place, alongside adherence to regulations including Europe’s GDPR and the patchwork of privacy laws across the US. With that said, we’re still seeing even established public companies failing to implement even the basics – like multi-factor authentication – so there’s plenty of room for improvement here, and an opportunity for companies to use privacy as a competitive advantage.    
4. International regulatory considerations for companies with a global footprint. Navigating legal landscapes, from tax laws to data localization, can be expensive and burdensome – but it’s essential for companies looking to exit in the current climate. You’ll need to work with local counsel (ideally experienced with growing companies), establish robust compliance programs, and implement programs or technologies to monitor changes.  
5. Labor-related liabilities and employment law compliance. Employment disputes can lead to costly litigation and damage to the company’s reputation, which is why clearly demonstrating compliance can be a competitive advantage. Proactive strategies to reduce risk (and improve your exit story) here include: 

• Maintaining accurate employee records. 

• Implementing clear and compliant employment policies. 

• Providing regular training on employment law compliance. 

• Conducting regular audits of employment practices. 

• Properly classifying employees and contractors. 

Why Legal Strategy for Exit is Key in 2025 

Antitrust scrutiny and governance quality have both intensified recently, bringing unique legal challenges to the fore in 2025. In terms of the antitrust landscape, the US is widely expecting a return to traditional antitrust norms under Trump, alongside aggressive enforcement. Meanwhile in Europe, things are a little less clear – with policy priorities likely meaning deals will undergo intense scrutiny, particularly in the digital market.  

At the same time, good governance quality is increasingly important. Clean legal foundations can offer a competitive edge in the current climate, as we’re seeing with strong privacy and employment hygiene. In fact, we estimate a 15-20% valuation premium for companies with strong governance practices, when compared to those requiring remediation during the exit process. That’s a compelling reason to prioritize governance in your exit strategy in the current climate.  

Beyond Competition and Governance 

We’ve seen a spike in interest in alternative exit strategies, such as continuation funds and secondary transactions, earnout structures, and strategic minority investments.  

The increasing interest in these exit options is a direct response to today’s uncertain economic environment. Each of the above options prioritizes gradual integration and valuation validation over time, and tends to favor the buyer (unsurprisingly, given the market conditions).  

However, while these options do offer flexibility – they also demand meticulous drafting in the agreements to reduce the risk of future disputes:  

• Continuation funds and secondary transactions provide existing investors with liquidity, allowing them to exit partially or entirely, while the company continues its growth trajectory with potentially new investment. This allows for a more controlled transition but requires careful negotiation to ensure fair valuations and protect the interests of all parties. 

• Earnout structures with longer measurement periods tie a portion of the purchase price to the company’s future performance, mitigating the buyer’s risk and aligning the seller’s interests with the company’s continued success.  However, these structures demand meticulous drafting to define clear performance metrics and prevent future disputes. 

• Strategic minority investments as stepping stones to full acquisition to allow the buyer time to assess the company’s potential and integrate it gradually. This can be beneficial for both parties, but it requires careful consideration of governance rights and potential conflicts of interest. 

The devil truly is in the details for these alternative exit strategies. This means sourcing experienced legal counsel is not a luxury, but a necessity.  

5 Steps For Your Compelling Exit Story & Strategy in 2025 

An exit story is a combination of narrative and data that shows a holistic image of the company and provides details about its value and capabilities. It blends information about the market, the founders, and the company financials. Here are some of the steps you’ll need to take to tell your exit story:   

Demonstrate sustainable unit economics 

Being able to demonstrate that your company’s products or services generate profit on a per-unit basis over the long term is critical in the current exit climate. Some of the key metrics potential acquirers will be looking at include:  

• Customer Lifetime Value (LTV) 

• Customer Acquisition Cost (CAC) 

• An LTV/CAC ratio of 3:1 or higher (This ratio indicates whether a company is generating enough value from its customers to justify the cost of acquiring them.) 

• Contribution Margin (Revenue after deducting variable costs). 

Given the turbulence of the past few years (especially in the tech sector), we’d strongly urge companies in this industry to focus on these metrics to attract investment and acquisition opportunities. Companies with strong unit economics are less likely to experience sudden downturns or require significant restructuring after an acquisition, reducing perceived risk.  

Conduct a comprehensive legal readiness assessment 18-24 months prior to the target exit 

As we outlined above, the 6-12 month timeline for readiness assessments are no longer common. We’re seeing more companies taking 18-24 months, or even longer, after the readiness assessment before an exit.  

So, if you’re considering an exit within the next 1.5-3 years, it’s time to start your readiness assessment and to start getting your documents in order for due diligence. Remember, due diligence investigations are going deeper and are, on average, more thorough now than they have been in the past. Meticulous books and compliant, detailed governance records can make-or-break deals in the current climate.  

Some of the most common gaps include: 

– Outdated or missing board resolutions. 

– Inaccurate cap tables. 

– Unfiled shareholder agreements. 

Review and update cap table and option pool documentation 

A clean cap table is accurate, organized, and accounts for the company’s equity.  It’s also easy to verify with information about the equity transactions easily accessible. But the reality is that, unless you’ve previously gone through the process of cleaning up your cap table – it’s very likely at least a little messy.  

The process of tidying it up involves getting those documents in order, resolving any discrepancies, negotiating buybacks from dormant shareholders, and cross-refencing the final version of the cap table to make sure it makes sense.   

Get your intellectual property in order (and document it) 

This step requires you to perform a thorough IP audit and address any potential ownership or licensing issues. This includes establishing corporate ownership of IP, putting agreements in place relating to ownership of IP developed in the future, documenting your IP and how you protect it, outlining a clear value proposition showing how your IP strategy protects your company’s knowledge and proprietary assets, and creating and maintaining a risk matrix or similar document that identifies actual and potential risks early.  

Implement robust privacy and cybersecurity compliance programs 

We firmly believe that privacy and cybersecurity is one of the most underutilized competitive advantages available today. A robust program can help you avoid fines and attract investment and acquirers, but it also demonstrates that you’re a responsible steward of information – which is invaluable today. Our privacy compliance checklist is a great place to start if you’re looking to improve your privacy posture this year.    

Need help preparing your company for an exit? Reach out. Our team encompasses commercial, tax, intellectual property, privacy, and employment partner-level attorneys and we have a wealth of large-deal and on-demand transactional experience. We regularly work with growing companies and can guide you through the process. See our team. 

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