Private Equity is a private investor’s wealth, which they invest in the development of a business that they think will benefit them. For example, modern investors can finance technology, business expansion, revitalization, or the purchase of another business. Typically, private investors engage in private investment for no more than 7 years, after which they begin to plan an exit strategy. There are plenty of exit strategies to develop, and in this article, we’ll look at their options and how to execute them most effectively.
The Initial Public Offering (IPO)
One of the most common private equity exit strategies is a public listing of the company. Investors put up for sale a portion of the shares they own, and depending on the situation, these shares may be sold either quickly, after the company is incorporated, or when the shares are already publicly traded. However, it is worth noting that such transactions can only be carried out with large-scale companies that have the potential for further growth and development.
In other words, the strategic acquisition is also called a commercial sale. This method can be applied if the company you have financed undergoes the process of takeover by another company. After that, you, on the right of the investor, can get a return in the form of a share of the value of the sale. This alternative is one of the most popular within the private equity exit. The fact is that for the buyer of the business, this process will have a strategic advantage, and therefore they can pay any amount extra to complete the transaction more quickly, which positively affects the investor’s profits.
A secondary sale means reselling your share of the business to another private investor or investment firm. Many reasons may follow, such as if the business requires too much investment that the current equity fund is unable to maintain. Also, it can happen if the investors planned to support the development of the company, up to a certain stage, and after that, they may transfer all rights and management to other investors.
Buyout by promoters and liquidation
In this case, the investor’s shares are bought back by the company’s management itself. This is a mutually beneficial operation that is excellent as an exit strategy for both the management of the company and private investors.
At the same time, liquidation is the least favorable way to exit private capital, but sometimes it has to be resorted to when the company’s management and investors have failed to properly and successfully support the company’s operations.
How can a virtual data room help with a private equity exit strategy?
You can ease your plight during the execution of a private equity exit strategy with the use of a secure and automated advanced technology tool: the data room. Virtual data rooms are cloud-based programs that provide a secure and convenient space for many financial transactions.
Below we describe exactly how VDRs can help with your exit strategy:
- Fastly index and categorize transaction documents using specialized artificial intelligence. Save countless hours preparing documents for editing. And get to prudence with buyers in one click
- Smart categories and AI indexing-optimize your data room design in no time. Just hover your mouse over documents to view their contents
- Comprehensive Editing – Quickly edit and post quickly with buyers thanks to auto-editing. Enable quick deletion with exclusive buyers by specifying reasons (e.g., confidentiality, strategic or commercial). Delete confidential information as quickly as possible and prepare your deal to the best standards
- Collaborate effectively – Prepare deal artifacts, such as CIM and teaser, and share them with the deal team before marketing the deal. Easily access your project inbox to collaborate on a full set of documents