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It is one of the most common mistakes that less experienced private investors make, and it is entirely understandable. When you are presented with an exciting investment opportunity — a compelling business, a credible team, an attractive return — it is tempting to focus on what you stand to gain and to give less thought to a question that is arguably more important: how, exactly, do you get your money back?
This is what is meant by an exit strategy, and at Oros Consultancy, we consider it one of the first things any investor should interrogate before committing a single pound.
What is an exit strategy?
In the context of a private company investment, an exit strategy is the planned mechanism by which investors ultimately realise a return on their capital. Unlike a publicly listed share — which you can sell on any given trading day to another willing buyer — a stake in a private business cannot be easily liquidated on demand. Your money is, by its nature, committed for a period of time. The exit strategy is the plan for how and when that commitment comes to an end and value is returned to investors.
Without a credible, clearly articulated exit strategy, a private investment is essentially an act of faith. With one, it is a structured financial plan with identifiable milestones.
The main types of exit
There are three primary exit routes for a private company, and the best-structured investment opportunities either have a clearly identified preferred route or — better still — the flexibility to pursue more than one.
A trade sale involves selling the entire business to a larger industry player — often a competitor, a private equity-backed consolidator, or a listed company seeking to grow through acquisition. Trade buyers are typically willing to pay strong prices because they can extract synergies that a purely financial buyer cannot. In the funeral sector, for example, a large national operator or a funeral services group backed by institutional capital might acquire an established regional group because it gives them instant access to locations, staff, customer relationships, and trading history.
A secondary sale to a financial buyer — such as a large private equity fund or a pension fund looking for stable, cash-generative assets — offers a somewhat different dynamic. These buyers are less interested in synergies and more interested in the quality and predictability of the cash flows the business generates. Stable, essential-services businesses with professional management and audited accounts are particularly attractive to this type of acquirer.
An IPO — an initial public offering, or stock market flotation — represents the third route. This involves listing the company's shares on a public stock exchange, allowing investors to sell their stakes into the market over time. IPOs can generate the highest returns of the three exit routes, but they are also the most complex and time-consuming to execute, and they depend on favourable market conditions.
Why having multiple exit options matters
A business that has only one viable exit route is a business that is entirely dependent on one set of circumstances aligning correctly. Markets close. Potential buyers change strategy. Regulatory environments shift. The best-structured investment opportunities are built with sufficient financial rigour and governance quality to remain attractive across multiple exit scenarios — so that if one route is delayed or unavailable, another remains open.
When evaluating any private investment opportunity, look for businesses that are building towards a dual-track exit capability from the outset — preparing simultaneously for both a trade sale and a potential public listing, with clearly defined financial milestones that trigger the process. This matters because the governance infrastructure required for each exit type takes time to build properly, and a business that tries to professionalise its accounts, compliance framework, and management structure immediately before a sale or listing will always command a lower price than one that has been operating to those standards throughout its growth journey.
The importance of team experience at exit
An exit strategy is only as credible as the team responsible for executing it.
When assessing a private investment opportunity, look carefully at whether the leadership and advisory team have direct, relevant experience of taking a business through a significant exit — not just general business success, but specific, demonstrable experience of the precise process the investment is targeting.
Have they personally led a business through a public markets listing? Have they prepared a business for a high-value trade sale and seen it through to completion? Have they managed the integration and governance requirements that make a business attractive to institutional buyers? These are the questions worth asking. Experience of this kind cannot be manufactured, and it is the difference between a team that is theoretically capable of a strong exit and one that has the institutional memory to actually deliver one.
What this means for you as an investor
When you consider any private investment opportunity, ask these questions directly. What is the exit plan? When is the exit expected? What conditions need to be met for the exit to proceed? Who on the team has actually been through this process before?
If the answers are vague, treat that as a warning sign. If the answers are specific, credible, and backed by demonstrable experience, that is a very different proposition.
To understand more about how exit strategy features in the investment opportunities we present at Oros Consultancy, and whether an investment of this nature might be appropriate for your circumstances, contact our team for a confidential conversation.
Your capital is at risk. This article does not constitute financial advice. These investments are intended for Certified High Net Worth Individuals and Self-Certified Sophisticated Investors only.