Due to the diversity of internal growth process and results and the differences of external environment and conditions, the exit modes of private equity investment are also diversified, including initial public offering, share repurchase, merger and acquisition, management buyout, secondary sale and bankruptcy liquidation.

The above methods are similar to some extent, so the exit methods of private equity investment are generally divided into IPO, equity transfer (including enterprise repurchase, merger and secondary sale) and bankruptcy liquidation.

1、IPO

IPO is an initial public offering, which is usually carried out when the investment enterprise reaches the ideal state. It can enable private equity investors to convert their non-tradable shares into public shares through the listing of enterprises, and realize investment income.

IPO is considered as one of the most common and ideal exit ways. In the United States, about 30% of venture capital is withdrawn in this way.

So far, there are five main ways for private equity funds to go public through IPO.

At present, IPO exit is becoming more and more difficult, and the profit space is gradually narrowing. However, this exit method still has great advantages, which can not only obtain the opportunity of continuous financing in the securities market, but also maintain the independence of enterprises, and for investors, it can also obtain a higher return on investment.

2. Equity transfer

Equity transfer is a system designed for venture capitalists who want to quit the enterprise quickly and realize capital appreciation. According to statistics, more than one-third of venture capital in the United States finally chose this exit method. The ways of equity transfer include the following.

(1) enterprise repurchase

Enterprise repurchase refers to the redemption of the equity held by the enterprise from the private equity investment when the investment period expires. This is a conservative exit method, which is usually a backup method chosen by the management of start-up enterprises in order to maintain the independence of the company. Moreover, it is worth noting that share repurchase has brought good benefits to private equity investment institutions.

(2) Mergers and acquisitions

M&A refers to the M&A between enterprises. Private equity funds invest in start-ups not for business, but to realize the value-added of rights and interests quickly, and then withdraw completely. Therefore, M&A is a very suitable exit method for private equity funds, and its benefits are as follows.

1. M&A is usually to acquire start-ups at a higher price, so that private equity funds can quickly withdraw cash, thus quickly withdrawing and realizing the return on investment.

2. It can be realized at any development stage of the startup enterprise. After all, the resources for public listing are limited, and not all start-ups can go public smoothly. Moreover, through mergers and acquisitions, private equity funds do not need to be excessively restricted by laws and regulations. As long as both parties reach an agreement, they can freely and completely withdraw.

3. The mechanism is flexible and the whole process is controllable. Private equity funds can freely choose interested trading objects, selling time and share proportion, and act according to their own wishes in the process.

(3) secondary market sales

Secondary market sale means that after the invested enterprise develops to a certain stage, if the private equity investment period expires, or for some reason, it is necessary to realize income, the private equity investment fund transfers its shares to another private equity investment fund and withdraws from venture capital.

3. Enterprise liquidation

Enterprise liquidation refers to the private equity investment fund withdrawing its investment through the liquidation company when the investment enterprise can't continue to operate, which is the worst result of investment withdrawal and often only part of the investment can be recovered.

Liquidation includes voluntary liquidation and involuntary liquidation.

Second, exit the process.

The exit process of private equity investment institutions is generally carried out in the following order.

Third, the determination of exit time.

The starting point of the withdrawal operation of private investment funds is the determination of the withdrawal time. When determining the exit opportunity, private investment funds should not only consider the capital operation and income level of the invested enterprise at that time, but also analyze whether the overall macroeconomic environment at that time is suitable for exit.

From the best point of view, the time to quit should be when the market overestimates the enterprise. Whether the market will overestimate an enterprise, based on investors' expectations of the market, smart private equity funds are very good at improving investors' expectations of enterprises, but it also needs the cooperation of market fundamentals.

Generally, the overall economy should improve. When the market thinks that an industry is a sunrise industry, it is easy for enterprises in this industry to sell at a good price.

However, as long as private investment funds can greatly enhance the value of enterprises by improving their performance, they don't have to invest too much energy in the choice of market timing. As long as they don't grasp the timing, they will always make money.

After determining the exit opportunity, the private equity investment foundation will make a detailed evaluation of various alternative exit paths.

On the basis of considering the overall macro environment in which the exit opportunity is located, the advantages and disadvantages of various exit paths are compared in depth. At this time, fund managers can also hire professional institutions and investment banks to assist them in their analysis.

Fourthly, the design of exit process.

After determining the alternative exit path, private equity investment funds began to design the entire exit process.

Fund managers usually hire professionals in various fields to be responsible for different aspects of operations, such as hiring institutions related to law, tax policy and business affairs, and at the same time, one or more institutions will conduct real-time monitoring to ensure that every link of the exit process works well.

Private investment funds must combine the characteristics of the selected exit path to determine the specific exit process plan. A feasible, complete and pre-drawn withdrawal plan plays a vital role in the success or failure of the whole withdrawal process.

According to the exit process plan, private investment funds should be allocated to the corresponding responsibilities and obligations of all parties involved in the exit process. The exit process generally involves a lot of manpower, and the effective distribution of tasks and responsibilities can ensure the smooth exit process.

In addition, the income that fund managers and senior managers can get after the successful withdrawal of private investment funds is generally determined in the contract before the investment starts to operate, so what needs to be determined at this time is the reward and punishment mechanism for other staff who participate in the withdrawal process and play an important role.

Monitoring the exit process of verb (verb's abbreviation)

After the private investment fund completes a series of corresponding preparations, the exit procedure can begin.

First of all, the relevant documents prepared in advance should be provided to potential bidders. The key point of this process is that it requires potential bidders to sign a legally binding confidentiality agreement before obtaining any information.

After the exit procedure officially begins, private equity funds must provide additional information to potential bidders and ensure that they can conduct selective exposure with the company's management team.

The style of each exit process is very different. Fund managers and corporate consultants of private investment funds should evaluate different bids in time after receiving bidders' bids, and this process may last for several weeks.

In this process, the bidder may be questioned and re-quote according to the changed situation.

Transaction settlement and post-evaluation review of intransitive verbs

After several rounds of specific negotiations, the so-called "sale agreement" and the agreement reached by both parties basically completed a withdrawal transaction, and the result was the transfer of equity.

In addition, in order to accumulate some useful experience for future exit transactions, it is also very important to evaluate and review the whole exit process afterwards.

In particular, the task coordination and overall exit strategy involved in the whole transaction process deserve special attention.

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