The Final Act: A Comprehensive Analysis of The Private Equity Exit Processes

Abstract: This thesis draws upon eight in-depth interviews, with top-level executives in the Private Equity industry to explore the overlooked divestment phase of the investment process. The study aims to provide insights into the divestment process and the significant factors that influence its outcomes. Using Icek Ajzen's Theory of Planned Behavior, the attitudes of Private Equity firms towards divestment were found to have a degree of uniformity, but differences in investment strategies, risk tolerance, and perceptions can influence them. External factors like societal expectations, investor pressure, and industry benchmarks can also play a role in decision-making. Private Equity firms tend to adopt similar strategies to reduce the complexity and uncertainty of the exit process and enhance their perceived control over it, such as formulating a clear strategic plan. The study identifies three critical factors that influence the outcome of the divestment process. The fund structure shapes the behavior of Private Equity firms and influences their investment decisions, risk appetite, and exit strategies. The performance of the portfolio company and market conditions are key determinants of an investor's attitude towards a potential exit, and Private Equity firms may shift their investment strategy during unfavorable conditions. Continuation vehicles offer an alternative method that provides greater control over the timing and method of exit.