In this white paper, we explore the dynamics driving the private equity exit market.
Exit market fluctuations are cyclical – we’ve documented that at length elsewhere – but we believe there is a significant and underdiscussed secular trend impacting exits as well: the role of incentives.
We believe the exit market is an example of a repeated game. We describe the incentives that underpin the exit environment and discuss why the cooperative equilibrium that existed for decades – what we call the “Old Exit Game” – is breaking down. Sponsors are facing novel incentives and a changing market structure that should be sticky and durable.
We explore the New Exit Game and its rules and implications for sponsors and allocators.
You can find the full piece here (Password: Arctos1!).
As always, we welcome your feedback and questions.