The Private Equity Toolkit

13Exit Strategies and Deal Monetization

Key Topics in Chapter 13:

• How to exit a minority investment (effortlessly)
• Exiting a majority transaction: Should you time the market?
• Conventional exit routes: an IPO, strategic sale or sponsor-to-sponsor buyout
• Can't exit your investment? Alternative deal monetization strategies to the rescue
• The finishing touch: exit preparation roadmap for every portfolio company

Every story needs a good ending; and every private equity investment needs a profitable exit. Although quarterly valuation uplifts of a portfolio business during the holding period may be comforting to your LPs, these interim estimates merely represent “paper gains.” Nobody really knows for sure how well any private equity deal will work out until the investment is fully monetized. While quarterly valuations serve as a useful directional guide to your investors, they will be primarily concerned with the return of capital and excess profit distributions from each transaction in your portfolio. The timing and the magnitude of these payments form your fund's investment track record—a critical measure of performance that will directly influence investors’ decision whether or not to commit to your firm's future fundraisings. Private equity sponsors are well aware that their very livelihood is contingent upon delivering a solid stream of timely and profitable exits from their portfolio. Moreover, as regular sellers of businesses, financial investors are regarded as important ...