Macroeconomic effects on Private Equity funds’ exit determinations

Abstract

This thesis studies the external and internal exit determinants of European, Canadian and American private equity funds, using a data set of 32.881 investments completed between 1990 and 2021. The most common exits are through trade sales and sales to GP. We show that the likelihood of the different exit channels alters with changing market- and fund characteristics. The exit channels depend on the general economic environment, which significantly affects the window of opportunity for PE firms. Funds with more experience can exploit other exit opportunities while minimizing their risk of writing off investments. These results indicate that the average private equity fund is flexible and adapts depending on current and future market conditions. Key words: Private Equity funds, exit channels, write-off, cyclicality, leveraged buyout, VIX, interest rate, great financial crisis, expertise.