Private Equity: Why an IPO Isn’t the Only Way Out

When people think of private equity exits, an IPO is more often than not the first that springs to mind. However with the dearth of IPO’s in recent years, others have have come to the fore,  from trade sales and secondary buyouts to continuation vehicles, there are several ways investors can realise value.

An IPO is straightforward: a private company grows, reaches sufficient scale, lists on a stock exchange and the private equity investor sells its stake. But an IPO is only one possible route, and in recent years it has been far from the most dependable.

Our latest short video interview with HarbourVest Global Private Equity (HVPE) looks at the different ways private equity investments can be realised and why having multiple potential exit routes is an important part of private equity investing.

The private equity industry has faced a challenging exit environment over recent years. Higher interest rates, valuation uncertainty and subdued public markets have made IPOs less attractive or less achievable for many portfolio companies.

In 2024, global private equity exit value fell to a five-year low, with IPOs accounting for just 12% of exit value, compared with around half for trade sales. The market began to improve in 2025, with global private equity exit activity increasing. However, trade sales remained by far the most common route, with 2,493 recorded during the year, according to S&P Global Market Intelligence.

So if an IPO isn’t available, what other options does a private equity investor have?

Trade sale

A trade sale involves selling a portfolio company to another company; typically a strategic buyer operating in the same or a related industry. This can be an attractive exit because a corporate buyer may be able to identify synergies that another investor cannot.

Trade sales have become a particularly important route for private equity investors. In 2025, they accounted for the majority of global private equity exits by transaction count. In the UK, trade sales represented 60% of private equity exits in 2025, according to KPMG, with secondary buyouts accounting for a further 36%.

Secondary buyout

A company doesn’t necessarily have to be sold to another operating business. It can be sold to another private equity firm. This is known as a secondary buyout or sponsor-to-sponsor transaction.

The original private equity investor realises its investment, while the new private equity owner takes over the company and seeks to create further value. This can make sense when the business still has significant growth potential but the original fund has reached the point where it needs to return capital to its investors.

Secondary buyouts have become an important part of the private equity ecosystem, providing another potential source of liquidity when IPO markets are subdued.

Continuation vehicles

There is another increasingly important option: the continuation vehicle. Rather than selling a portfolio company to an external buyer, a private equity manager can establish a new vehicle to hold the asset for a longer period. Existing investors may have the opportunity to receive liquidity, while new investors can provide capital to continue owning and supporting the business.

This can be particularly useful when a manager believes a high-quality company still has significant potential but the original fund is approaching the end of its investment period. It reflects an important change in private markets: the traditional five-to-seven-year investment cycle is becoming more flexible.

Why multiple exit routes matter

For private equity investors, the key point is that there isn’t one universal exit strategy. The optimal route depends on the individual company, its growth prospects, market conditions, valuations and the appetite of potential buyers. A strong business might attract a strategic corporate buyer. Another might be better suited to a secondary buyout.

A high-growth technology company could eventually become an IPO candidate, whilst another company may benefit from remaining private for longer through a continuation vehicle. Having multiple potential routes to liquidity can therefore be an important part of private equity portfolio management.

In our latest interview with HarbourVest Global Private Equity, we explore the different private equity exit strategies available to managers and why the ability to navigate different exit environments is an important part of generating long-term investor returns.