Exit strategies in private equity deals: a shifting landscape

Private equity exit strategies are evolving, due in part to shifting market conditions, longer holding periods, and new tools. Two partners from the law firm Elvinger Hoss Prussen discuss the importance of the right legal counsel and break down various exit options and common pitfalls.

Anna Hermelinski-Ayache and Katia Panichi have advised on plenty of private equity deals, and one thing they have learned is that no two are alike, so there’s no step-by-step approach to crafting the best exit. “Many factors have to be weighed before the most suitable route becomes clear on when and how to exit,” says Hermelinski-Ayache.  “In addition to the legal and regulatory landscape, market appetite and sector trends all need to be taken into account.”

Sponsors should therefore look for legal counsel who can also act as trusted advisors, ideally with a market-wide view and deep understanding of the toolkit and rules that apply, and who can craft a tailored solution according to best market practice, not just the most obvious one.

The team at Elvinger Hoss Prussen should know. Their expertise spans large, mid-market, small and venture capital deals across many of the sectors most attractive to private equity today, including healthcare, pharmaceuticals, financial and professional services, tech, AI and defence. Working across industries and deal sizes, rather than the same sort of transaction, lets an advisor spot trends early and help sponsors get an edge as the market changes.

It’s also worth choosing a firm that offers legal support beyond M&A and corporate law. Seemingly simple exits often end up much more complicated, requiring help from tax, regulatory, IP and employment teams as well. Transaction-only legal counsel may lack the broad view needed to foresee issues that can drastically slow an exit down.

Exit options: wider choice, new preferences

The menu of viable exits is wider than it used to be. While trade sales and IPOs still make sense once a company has hit its growth targets, secondary buyouts and continuation funds are now mainstream routes. Partial exits are on the rise as investors see growth potential remaining but still want to take some cash out. Holding periods are also stretching, with investors reluctant to crystallise losses.

“These days, private equity sponsors tend to behave more like strategic investors with a long-term perspective,” notes Panichi. “If a sponsor exits too quickly, management doesn’t have time to realise the returns tied to their own incentive plans,” Hermelinski-Ayache adds. Options have also opened up for distressed exits, which used to end in bankruptcy: Luxembourg now offers a real path via a reor­ganisation law based on the EU Restructuring Directive.

“Many restructuring cases that would otherwise have been carried out in the UK or elsewhere now stay in Luxembourg,” says Panichi.

Sponsors who once committed to a single exit route at investment now draft documentation designed to keep several paths open, since conditions can change before an exit closes. Preparation should start well before a sale process opens: good housekeeping, minor reorganisations, a review of shareholder agreements and a look at regulatory exposure and foreign direct investment screening all make a company more attractive to a buyer.

Pitfalls to avoid

“Launching an exit too early is a classic pitfall,” says Hermelinski-Ayache. Sometimes the company, management and documentation simply are not ready, and the process ends up rushed, and litigation may follow. The reverse is just as risky, she says. “If a sponsor waits too long, the financing conditions, sector appetite or the regulatory environment may have moved against them.”

A poorly organised data room, with unresolved tax, regulatory or legal issues, complicates due diligence and is hard to fix once an exit is underway. Management readiness is another factor: internal conflicts or unfavourable terms in management incentive plans can trigger disputes and litigation with management, especially if a plan is amended unfairly. Continuation funds carry their own risk, since selling an asset from one of a sponsor’s own funds to another is inherently conflicted. As Katia Panichi puts it: “To make it work, you need to guard against any perception of unfairness on pricing, valuation and the conditions of sale.”

Luxembourg has its own requirements that many international sponsors don’t expect. US or UK sponsors are sometimes surprised by how much substance is required in Luxembourg, and buyers often assume a holding structure can be run remotely, when in fact it can’t. The same goes for regulated entities, where buyers tend to underestimate the specificities an acquisition needs to address.

This article was first published in Paperjam (October2026). For further information, please visit [Paperjam].