What is an exit?
An exit is the moment when an investor sells their ownership in a company and realizes the return. It is the event that determines whether an investment was profitable or not.
Types of exits
- IPO — The company goes public and shares can be sold on the open market
- Acquisition (M&A) — The company is acquired by another company
- Secondary sale — Shares are sold to another investor on the secondary market
- Buyback — The company buys back shares from investors
Time horizons
In unlisted companies, it often takes 5-10 years before an exit occurs. Secondary trading provides the opportunity to realize parts of the investment before a formal exit.