How Should GP Plan to Sell an Investment?
It is important that the major shareholders agree on a common strategy for realising the investment before making it.
It will not always be possible to realise this strategy, for example if the investment does not perform and/or buyers do not come forward, but it is desirable to agree an exit strategy in advance.
Exit considerations should form part of the discussions at the initial investment appraisal and provisions should be negotiated to cover both likely and less likely situations. These considerations should be included in the overall investment recommendations. The divestment or exit process should be discussed with co-investors, other syndicate members and the management team of the portfolio company prior to the initial investment.
The GP should seek to ensure that it negotiates appropriate mechanisms at the time of investment to ensure that any stalemate over the divestment of an investment can be resolved in a manner appropriate to the fund.