A Study On The Exit Decision Of Privite Equity

The exit decision of private equity can directly affect the profitability of a project. Theinterest relationship first lies between PE and entrepreneurial firms, and then lies betweenPE and GPs. Hence, before making an exit decision, PE has to provide the specific exit planto GPs. If there is no suitable exit decision, GPs would not agree to invest the firm and theproject. The decision making process is complex, and it will not only impact the feasibilityof the exit and the profit level of the investment, but also will have influence on thedevelopment of the entrepreneurial firm. An appropriate exit decision can maximize thereturn on investment. Therefore, making a good exit decision is of great importance.Exit timing, exit extent and exit route are the three key aspects in an exit decision. Sotaking into account the actual situation of PE in our country, our aim is to build up anintegrated model to accommodate all the three key factors on the basis of other scholars’researches, so that can provide decision makers with effective references to maximizebenefits as well as make the best of every sides.We use the he combination of qualitative and quantitative research methods in thispaper. For quantitative methods, we use game theory approach to choose the exit route,econometric method to determine exit timing, and microeconomic method to calculate exitextent. In the end, we adopt a certain logical framework to effectively integrate the threeaspects to get the best exit decision.The research results show that PE prefer IPO more to other exit routes, and the exittiming is up to the feature of PE, the firm and the financial status of the firm, what’s more,the exit extent is associated with capital and management costs of PE.