The exit environment recently ranked as the second greatest challenge facing global PE fund managers, according to Preqin’s H1 2017 Outlook report. As buyout firms weigh an uncertain exit outlook, they are increasingly seeking to de-risk early by selling minority stakes in portfolio investments to preferred LPs. Partial exits to LPs have become more common in both Europe and the US, accounting for 24% of all partial exits this year, according to PitchBook.
Why Are Early Partial Exits Popular? 
Such deals allow buyout firms to lock in a return, while also sharing in future appreciation of an asset which is expected to continue to perform well. In recent years LPs have sought to ramp up their investment management capabilities, seeking new ways to deploy larger amounts of capital by acquiring a minority stake and taking a more active role in managing an investment alongside a PE sponsor. The investment provides the LP with an early look at an asset that is likely to be on sale in the near future, as well as assisting to cement the relationship between the buyout firm and the LP.
How to Achieve a Successful Early Partial Exit