We look at the optimal exit routes to realize highest returns on our investments and to re-inject part of the sale proceeds into new opportunities. The time frame for realizing value –the investment horizon- has been typically 5 to 7 years, although some exceptions of shorter-term holdings do occur.
The principal exit routes for harvesting an investment are listed below:
- Trade Sales: the sale of a portfolio company to an industry player, including a larger competitor. This route often brings robust valuations especially in the case of acquisition by an industry competitor, who is seeking to gain market share, and is willing to pay a premium for the portfolio company,
- Buybacks: the repurchase of Growthgate’s stake by the other co-shareholders, founders or the management team in a MBO transaction,
- Secondary Sale: the purchase of Growthgate’s stake by another PE firm; and
- Initial Public Offerings: the part sale of a portfolio company (typically 30 percent at time of the IPO) via a listing of the shares on a regulated stock exchange. This exit route is most suitable at times when capital market conditions are optimal and valuation indicators are high.