The venture capital literature suggests that the most likely exit for a VC investing in a young technology-based firm is a trade sale. In line with this empirical observation, an increasing number of scholars have investigated the determinants of a successful acquisition. However, most of the received literature analyses acquisitions from the perspective of the acquirer and focuses on managerial actions that are likely to increase the acquisition success for the acquirer. In this paper, we take the perspective of the young technology-based firm and analyze to what extent managerial actions undertaken by these firms have an impact on their likelihood of being acquired and their eventual acquisition price.

To analyze management’s strategic actions that optimize both the acquisition likelihood and the acquisition price, we build on legitimacy theory (Singh, Tucker & House, 1986; Suchman, 1995). Institutional theories have long recognized that institutional norms can be subject to purposive manipulation by organizational agents (Aldrich & Fiol; 1994; Lounsbury & Glynn, 200; Zott & Huy, 2007). Young technology-based firms are expected to actively manipulate expectations to gain legitimacy. Gaining legitimacy is important for entrepreneurial ventures since the crucial motivator of external parties to provide the new venture with resources is the belief that the young technology-based firm is indeed legitimate (Zimmerman & Zeitz, 2002).