Exit Routes and Performance Measurement for Private Equity Investments

Private equity is an alternative form of financing companies, besides classical methods (bank loan or bonds), which is done in exchange of a part of the share capital of the company. This funding is realized by investors interested in the company that also offer portfolio companies expertise in order to increase their value. The investors’ gain is the difference between the selling price and the buying price of the shares. Therefore, the divestment process is of great importance for the investors. Because the shares are not liquid, the divestment process is complex. There are five different routes an investor can follow in order to liquidate the investment. Once the exit is over, the investor can measure the performance of the investment in several ways. The article presents the entire exit process and performance measurement of the investment.