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In parallel with tremendous growth, particularly over the past 15 years, private equity as a form of financial intermediation has become a focus area for academic research. The term ‘’ in its widest sense captures investments in companies that are not publicly quoted. Harvard professors and (2001, 2004) point out that despite the strong growth of the private equity industry and an increasing degree of academic attention, many questions about its functionings and features remain unanswered. The fact that private equity firms tend to avoid publicity about the transaction details and returns of their investments has been a barrier to extensive quantitative research. However, literature to date has elaborated in detail on aspects such as fundraising, contracts between private equity funds and investors, relationships between private equity providers and acquired companies, value creation and valuation, performance measures, to list only a few.

(1999) defines private equity organisations as partnerships specialising in venture capital, leveraged buyouts, mezzanine investments (which combine debt and equity contract characteristics), build-ups, distressed debt, and other related investments. Typically, the venture capital and leveraged buyout aspects are considered to represent the core nucleus of private equity activities. Private equity and venture capital firms are frequently labelled as ‘’. In contrast to public equity, private equity deals in general with companies that are not quoted on a public stock exchange.

Over the past decade, a scientific coverage of various aspects in relation to potential exit channels for private equity portfolio companies has emerged. A few important examples of recent contributions touching on divestment considerations are by: and (2003), who focus on the performance of public stock exchange listings; and (2003a, 2003b), who analyse full versus partial divestments and venture capital exit choices; and (2002), discussing the role of functioning public equity markets for the European private equity and venture capital industry; and (2001), examining potential applications of convertible securities in exit transactions; and (2001), reviewing existing knowledge about public listings of portfolio companies; and (2000), analysing valuation aspects in the context of a company sales to private equity investors; or and (1998), who analyse insider reputation aspects in the context of private equity driven public stock exchange listings.

As emphasised already in the introductory sections, due to the structural set-up of most private equity investors as closed-end funds, their investments have limited holding periods and thus require more or less timely exits. Whilst venture capital funds, which concentrate on start-up and early stage investments, have a typical investment horizon of seven to ten years, buyout funds target holding periods of 3 to 5 years (i.e., 2004, p. 76).

Having discussed the various steps of an exit process and relating considerations in the previous section, this part elaborates on the empirical study underpinning this book.

The objective of this work is to contribute to the understanding of decisions, styles and preferences in relation to exit processes for European buyout investments. A focus of the analysis has been set on decision determinants regarding exit processes, critically evaluating concepts and theories established and proven in studies which concentrate almost exclusively on the Northern American venture capital market. Additionally, relationships between the characteristics of buyout investors and their exit behaviour have been examined. While section 2 provided an introduction to the private equity industry, the leveraged buyout segment and also outlined basics about divestments, section 3 established the theoretical foundation for the empirical analysis and laid out a detailed review of relevant scientific studies. Section 4 dwelled into aspects to be considered at the various stages of typical exit processes and comparatively assessed different divestment alternatives such as trade sales and secondary buyouts, IPOs, buybacks, and recapitalisations. Building upon the first four sections, part 5 presented the empirical study, which is mainly based on a detailed dataset for a sample of 56 buyout investors.