Exit Strategy Analysis for a PE firm

Analyzing the IRR returned at the end of specific year thereby suggesting appropriate exit year for the investor

Merger & Acquisition Strategy Non Leveraged Dividend Recapitalisation

IPO Strategy
Strategy
Consideration for base year revenue estimation Consideration for base year revenue estimation Consideration for base year revenue estimation
Leverage multiple 11.5x Leverage multiple 11.5x Leverage multiple 11.5x
Share premium 30% Share premium 30% Share premium 30%

IRR IRR
35% 30% Appropriate Exit year Investor Equity $1224
30%
Appropriate Exit year Considering dividend payout year as FY2024 –
25%
as all debt has been wiped out
25% Taking no additional debt to payoff investor
20%
20% equity ,but using cash flows to pay dividend to
15% investor
15%
10% 10% Dividend payout rate 80%*CF
5% The investor never pulls out of the company
5%
0%
IRR 12.7%
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 0%
FY20 FY21 FY22 FY23 FY24 FY25 FY26

• Higher Exit Valuation possibility • Risk profile of the company isn’t

• Higher Liquidity affected
Able to sell stock completely Under prosperous market conditions IPO exit results in
higher valuation for portfolio companies No additional debt is amounted on the
company’s financials
• Lose complete control of the company • Not a complete Exit
• Management Support
The management remains in place for a longer time
• Synergy between the two financial entities • Depends on cash reserves of the
becomes critical • Company will be subject to increased company
regulation
• Management Support is absent