Timing is everything in private equity and knowing when to sell a portfolio company can make all the difference between a strong return and a missed opportunity. In this article, we interview several private equity partners to uncover the key signs they look for when deciding it’s time to exit an investment. From market conditions and company performance to strategic milestones and buyer interest, these strategic investors share the critical factors that guide their decision-making process, providing a behind-the-scenes look at how top firms maximize value at the right moment.
Explore our other articles in this series of roundtable discussions with private equity investors:
- How Private Equity Prepares a Business for Sale to Ensure a Smooth Deal Process
- What Entrepreneurs Often Neglect to Do When Preparing to Sell Their Company to Private Equity
- How Private Equity Determines If a Company Is Prepared to be a Platform Investment
- Private Equity’s Advice to Business Owners Selling Their Company
Meet the Panel of Private Equity Partners
The following responses have been edited for concision and clarity.
Ryan Anderson
We typically hold businesses for five to six years, and it’s not an exaggeration to say we start thinking about exit strategies even before we buy the business. In the last 18 months of our hold period, we focus on maximizing value and positioning the company for future success. During that time, we work closely with advisors and the management team to identify and execute the last value-adding moves, making sure we don’t leave any money on the table.
Brendan Forghani
We enter each investment with goals we hope to achieve during our partnership. Of course, things don’t always go according to plan, but as those goals and milestones are realized, we begin to consider an exit. We look at where the business is relative to where we thought it would be. The second lens we use is market and economic conditions. If the market environment is favorable and the business is in a strong position, we start to consider an exit.
Brandon Muirhead
We approach investments with a value creation plan, which is essentially an agreement with the management team about what we aim to achieve over a long period. A signal that we’re ready for an exit is when we’ve largely achieved that plan, whether it’s geographic expansion, product growth, or headcount increases.
Sean McNally
It’s more of an art than a science. There’s no single KPI that signals it’s time to sell. We look at a few things. For one, have we—alongside the management team and board—accomplished the strategic objectives we set when we acquired the business? Next, are the end markets the company operates in active and attractive for further investment? And finally, we assess how the management team is doing. If they feel they’ve reached their goals with us as a partner, it might be time to bring in another partner for the next phase of growth.
Erik Dykema
It’s always a balance between opportunity and risk. Holding out for the very last dollar rarely works—you need to leave some room for the next owner to realize value. Timing is also influenced by the dynamics of the fund itself. Firms have a set number of years to invest and then return capital, so there’s often pressure to exit even if the timing isn’t perfect. We’ve generally had patient investors, but this dynamic can affect other firms more strongly. Additionally, the personal goals of the entrepreneur, like nearing retirement age, can also play a role in deciding when to sell.
