Dual Track Exit Considerations
Insight from WPEVC Corporate Sponsor PwC
During the past several years, owners and companies have increased the use of creative exit strategies to provide themselves additional flexibily. We see companies using a wide variety of strategies - minority interests, joint ventures, Initial Public Offerings (IPO) and outright sales - to monetize their investments. Most commonly, we see a dual track strategy by private equity (PE) sponsors and venture capital firms which involve pursuing an IPO while simultaneously exploring the sale of portfolio companies through a private auction.
We see variations in how dual-track strategies are executed, depending on factors such as market conditions, sponsor motivations, and resources available. Firms may choose to be proactive or reactive in their approach—either openly pursuing willing buyers while moving closer to an IPO, or only considering purchase offers they receive.
When to be proactive
Some circumstances dictate a more proactive approach to implementing a dual-track strategy. The key considerations have to do with market volatility, holding periods, and the desire for more control over the exit value.
When to be reactive
In certain circumstances, a reactive posture may be warranted—specifically, if resources are limited or the firm doesn’t want to fully divest its investment:
A dual-track exit strategy can be both rewarding and demanding. Given the tradeoffs of the two tracks in terms of complexity and cost, the viewpoints of multiple stakeholders must be considered, including board members, fund investors, buyers, co-sponsors, and company management. Likewise, the importance of selecting the right advisor must also be stressed.
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