A PE firm will typically monetize their investment in one of the following ways:
Sale to a Strategic Buyer: Sales to strategic buyers typically have higher valuations and are more convenient since they are willing to pay more for the likelihood of synergies.
Another alternative is to sell to another financial buyer (often known as a sponsor-to-sponsor deal), although this is a less than optimal exit because financial purchasers cannot pay more for synergies.
Initial Public Offering (IPO) — The portfolio company can go through an IPO and sell its shares in the public market as a third way for a private equity firm to monetize its earnings, but this option is only available to larger firms (such as mega-funds or club agreements).
