Understanding
Private Equity
Exit Strategies

Before we begin, here are some examples of notable private equity exits in 2020. ---------- Now let’s take a hypothetical example of how exits like these can occur. ---------- Meet ABC PARTNERS, an institutional PE firm. ---------- ABC Partners serves as the conduit linking investors to private companies. ---------- ABC is looking for technology companies to acquire. After considering all the possibilities, they decide to invest in TechXYZ – who provides software for transportation logistics. TechXYZ currently has a team of 50 developers and 10 corporate clients using their transportation logistics software. They are looking for a private investor to help them grow. ---------- ABC invests $50 mm into TechXYZ and acquires 50% of the company valuing TechXYZ at $100 million. Upon acquisition, TechXYZ gets to work and deploys the capital toward growing their tech team. They hire 50 new developers and through time, grow to 100 corporate clients, increasing their revenue and cash flows. ---------- After about 5-7 years, ABC’s investors are expecting to make a profit, and its time for ABC to monetize its investment, or Exit. ---------- Let’s discuss the 3 most common examples of exit strategies. ---------- One of the more common exit strategies is an Initial Public Offering, which means you sell the shares of a company to the public. As a result of its growth, TechXYZ is valued at $1Bn with $100/share price - a gross profit of 10X for ABC and its investors. ---------- Another exit strategy is a strategic acquisition. A large publicly traded company, let’s say Corporate Software, purchases TechXYZ for $1bn. The $50mm investment is now worth $500mm, and will be distributed to ABC and its LPs. ---------- A third option is a secondary sale, where a private equity buyout firm, let’s name it Beta Partners, acquires TechXYZ for $1Bn. Once the deal is finalized, TechXYZ is now owned by Beta Partners, and ABC Partners distributes the cash sale to their LPs. ---------- Sign up to learn which institutional private equity funds on our platform have a strong track record in creating value for portfolio companies and implementing successful exit strategies. Easily create a web-based proposal for your clients with exposure to these types of opportunities.