A liquidation event often occurs when a company is sold and ceases to exist as a stand-alone company. The sale can be through an acquisition by another company or a merger with another company. Liquidation events are often provided for in stock purchase agreements by outside investors, as triggers that may cause those outside investors to be paid – and preferentially paid – upon the occurrence of the event. For example, upon the sale of a company, preferred stockholders often will get paid first, and they sometimes will get paid at a multiple of what the other common stockholders will get paid, subject to the terms of their stock purchase agreements. Preferred stockholders often negotiate such terms into their stock purchase agreements. In effect, they negotiate the right to have the assurance that, in the case in which a company is sold, they get their money back, and often at a multiple, before the founders get paid out. The term liquidation event is therefore one that is often closely negotiated by outside investors when considering whether to invest in a particular company, as it provides the investors more assurance that they won’t lose their money when investing in that company. Another type of liquidation event is a bankruptcy of the company.