As mentioned earlier, once an investee business has been successfully transformed and its value has increased, the PE firm would seek to monetise its investment. 

This is done through an exit strategy, which could involve selling the company to a trade buyer or another investor, taking it public through an IPO, or merging it with another company. Part of the proceeds from the exit are distributed to the PE firm and the investors who invested in the fund that was used to acquire the relevant business.

• A trade buyer might be a competitor or a business with complimentary products or services. 
• An investor buyer might be another private equity fund. 
• An IPO would involve listing the business’ shares on a stock exchange in order to sell those shares through the equity capital markets, then selling those shares to institutional investors, other professional investors, and the general public. 

Very occasionally, a PE firm might “sell” a business to another one of its funds, a process that is referred to as “rolling over” an investment. For example, if capital in “Fund A” is initially used to buy a business, the PE firm might later sell that business – at market rate, which hopefully represents a profit – to another one of its funds (let’s call this Fund B). This means that investors in Fund A can exit their investment, whilst investors in Fund B will benefit from any subsequent increases in value.