Monitoring and exits

After closing, the sponsor and management agree a plan of specific initiatives with owners, milestones and expected value. Early actions often include new reporting, a refreshed management incentive plan, quick procurement savings and preparation for add-on acquisitions.

Portfolio companies report monthly to the sponsor. Board meetings review performance against budget, covenant headroom and progress on initiatives. Associates prepare much of this material and are expected to spot deviations before management raises them.

A common strategy is a 'buy and build': acquiring smaller companies at lower multiples and folding them into the platform, which is valued at a higher multiple at exit.

Sale to a strategic buyer usually achieves the highest price because of synergies. Sale to another sponsor is common and quick. An IPO can achieve high value but takes longer to exit fully. A dividend recapitalisation returns cash early by adding debt, without selling.

Firms prepare for exit years ahead: clean audited accounts, a strong management team, a credible growth story and a vendor due diligence report. They exit when the plan has delivered and markets are receptive, not on a fixed date, though fund life puts an outer limit on holding periods.