The Importance of Exit via Acquisition to Venture Capital, Entrepreneurship, and Innovation

35 Pages Posted: 14 Dec 2021 Last revised: 13 Feb 2023

See all articles by Devin Reilly

Devin Reilly

Analysis Group

D. Daniel Sokol

USC Gould School of Law; USC Marshall School of Business

David Toniatti

Analysis Group, Inc.

Date Written: February 8, 2023


Antitrust regulators around the world, including in the UK, have proposed changes to merger review policies that impact how acquisitions of start-ups would be investigated and evaluated. Such changes will likely lead to heightened scrutiny—and increased costs and longer reviews—for many acquisitions, including both horizontal and non-horizontal mergers. In evaluating the merits of such changes, it is critical to take into account the important role that exit via acquisition plays in providing incentives for venture capital (VC) investment and entrepreneurship. This article seeks to provide context for evaluating the effects of such proposed changes. First, it documents the links among VC, entrepreneurship, and innovation, and how exit via acquisition can foster dynamic innovation, one of the stated goals of the CMA. Second, it identifies additional consumer benefits derived from acquisitions of small companies by larger companies. Third, it describes VC investment in the UK, including the favourable, yet fragile, position that the UK holds as a VC hub for continental Europe. Finally, it documents the recent increased diversity in VC investment and entrepreneurship in the UK, which could be curbed by the proposed changes.

Keywords: mergers, antitrust, entrepreneurship, venture capital

JEL Classification: K21, K22, M13, L13, L4, L40, G24

Suggested Citation

Reilly, Devin and Sokol, D. Daniel and Toniatti, David, The Importance of Exit via Acquisition to Venture Capital, Entrepreneurship, and Innovation (February 8, 2023). Minnesota Journal of International Law, Vol. 32, No. 1, 2023, Available at SSRN: or

Devin Reilly

Analysis Group ( email )

One South Dearborn
21st Floor
Chicago, IL 60603
United States

D. Daniel Sokol (Contact Author)

USC Gould School of Law ( email )

699 Exposition Boulevard
Los Angeles, CA 90089
United States

USC Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA California 90089
United States

David Toniatti

Analysis Group, Inc. ( email )

111 Huntington Avenue
10th floor
Boston, MA 02199
United States

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