Cashing Out Start-Ups Gets More Complicated

For acquisitions of private companies backed by venture capital, it’s becoming increasingly complicated to collect cash after the deal has been signed.

In contrast to a decade ago, when many such deals went through with little trouble, today’s venture-backed acquisitions are fraught with landmines that can result in delayed payments and reduced purchase prices long after the deal has been struck, say venture capitalists, entrepreneurs and deal attorneys.

Such complications were evident in the $125.2 million acquisition of privately held surveillance-technology firm Era Systems Corp. by SRA International Inc., a tech supplier to the federal government.

While the deal was struck in mid-2008, Era’s shareholders took a haircut on their purchase price and didn’t collect their reduced amount until last year, partly because of a disagreement during the escrow period.

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