Private Equity Exits And Outlook

A private equity company generally receives the large majority of its returns on an investment upon exit of the investment, and as such the exit is an important part of the life-cycle of a private equity transaction. The most commonly used methods available to private equity investors to exit their investments are described below:

Initial public offering (IPO)

Under an IPO, the shares of the investment are listed on a stock market and sold to the public. In most IPOs, the private equity company exits the investment by selling its shares in the market after the shares are listed. This exposes the returns on the investment to share price fluctuations.

Trade sale

Under a trade sale, the private equity company sells all of its shares of the investment to a third party often operating in the same industry as the company itself (i.e., strategic buyers). This exit method permits a private equity company to exit the investment completely and immediately upon the