What are the Best Exit Strategies for Private Equity Investors?

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The importance of a successful exit strategy cannot be undermined. An exit strategy is a plan for how the investor wants to exit the investment and gain returns. An efficient strategy determines the success of the private equity investment. The right exit plan can make all the difference between a profitable and less-productive business venture. 

It is imperative for private equity investors to understand and learn the best exit routes to cash out. Here, we will explore various private equity exit strategies they can adopt when exiting their investments. 


Best Exit Strategies for Private Equity Investors  

With private equity funds’ tremendous growth and potential worldwide, it is important to know various exit techniques. Those looking for a quick exit can prefer selling the firm to a strategic or financial buyer. Those with long-term investment goals wait until they get higher returns. These exit routes allow you to monetize your investments and gain from the upside. 

Here are a range of exit strategies. Choose one that assures the best return and lowest risk. 


Trade Sale/ Strategic Acquisition 

One of the most popular exit techniques is a trade sale. A trade sale or strategic acquisition in private equity means the investor sells their stake in the company to another investor or company. Usually, the investor employs this approach when the company becomes mature, and the investor can make a significant return on the investment. They take their share from the sale value.  

The buyer enjoys the strategic benefit of acquiring the same business, as it can complement another. The buyer is also ready to pay a premium to acquire the business. Though the trade sale offers great returns to the investor, it is quite a lengthy, expensive, and time-consuming process. 


Making the Company Public 

Another good strategy to offload investment is making the company public. The private equity investor must list the company on a stock exchange in this exit route. This mode of exit generates a considerable return on investment for the investor. Again, this exit strategy is lengthy and complex. Also, the investor must know and follow the compliance and many regulatory requirements. 


Initial Public Offering (IPO) 

One of the other ways to exit a private equity investment is through an IPO or initial public offering, which is the most common exit route. In this private equity exit technique, the investor offers shares of the company to the public. When a private equity company takes this public approach, it sells its shares to the public and receives cash, which helps it fetch returns on its investment. 

An Initial Public Offering is considered one of the best exit options when a company wants capital or to increase its share liquidity. However, this process is costly and time-consuming, as it requires finding the right investors. 


Company Sale 

Using investor relations private equity, selling the company to another bigger private equity firm is also a popular exit strategy. Also called a strategic sale, this type of exit route generates a return by selling its stake. Usually, the company’s buyer is a bigger, more prominent firm wishing to expand its business. 


Secondary Sale 

When a private equity investor wants to exit their investment through a secondary market, it is called a secondary sale. In this exit route, the investor sells the company’s shares to other investors who have already invested. This happens when companies need more money, and the current equity fund cannot fulfill its requirements.  



Recapitalization is an exit strategy in which the company’s capital structure is restructured. This requires new financing, equity valuation knowledge, and equity distribution to the shareholders. The company can raise more capital and enhance value. 

Also, there is dividend recapitalization, in which the company issues additional equity to the company’s existing shareholders. The company receives funds to pay off existing debt and make other capital investments. 



A successful private equity exit strategy, repurchase is when the management or the company’s promoters buy back the equity from the private investors. This is a win-win for both the investors and the management. 



Though this strategy is not used much, sometimes investors look for it. This is when the promoters, management, or investors of the company are unable to run the business successfully. 


Wrapping Up 

Private equity has become a key source of securing capital and driving the growth of start-ups and established companies. Private equity investors have an investment horizon of around five to seven years. They plan to exit after that and consider different exit strategies. The investors must know all the relevant exit strategies like selling the company, selling equity to a third party, etc. Depending on your objectives and risk tolerance, you can select any of the exit strategies mentioned above.


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