Private Equity Fund - Portfolio Company Sales (or exits)

Portfolio Company Sales (or exits)

A private equity fund's ultimate goal is to sell or exit its investments in portfolio companies for a return, known as internal rate of return (IRR) in excess of the price paid. These exit scenarios historically have been an IPO of the portfolio company or a sale of the company to a strategic acquirer through a merger or acquisition (M&A), also known as a trade sale. A sale of the portfolio company to another private equity firm, also known as a secondary sale, has become increasingly more common. In prior years, another exit strategy has been a preferred dividend by the portfolio company to the private equity fund to repay the capital investment, sometimes financed with additional debt.