Liquidation Waterfall - Launchopedia

The sequence in which all parties, including investors, employees, creditors, and others receive payments in the event of a company’s liquidation through acquisition or bankruptcy.⁷

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Alexa Cleek

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Liquidation

When a business is bankrupt or terminated, its assets are sold and the proceeds pay creditors. Anything left over is distributed to shareholders.²
1) The process of converting securities into cash. 2) The sale of the assets of a company to one or more acquirers in order to pay off debts. In the event that a corporation is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stock take precedence over the claims of those who own common stock.³
This is an event that represents the complete or partial closing of a company. In a liquidation event, a company’s assets and material goods (securities) are converted into cash and/or distributed for sale to pay off existing corporate debt.⁴
Liquidation is the sale of the assets of a portfolio company to one or more acquirers when venture capital investors receive some of the proceeds of the sale.⁵

Bankruptcy

An inability to pay debts. Chapter 11 of the bankruptcy code deals with reorganization, which allows the debtor to remain in business and negotiate for a restructuring of debt.³

Acquisition

A process under which a company acquires the controlling interest of another company.⁶

Related Terms Buyout | Merger Related Articles Founders: Do You Have An Exit Strategy?

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Alexa Cleek

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