Which of the following is a potential exit strategy for a private equity (PE) firm?

A sale is a fundamental exit strategy for a private equity firm as it allows the firm to realize a return on its investment by selling its ownership stake in the portfolio company. This can be executed through various channels, including selling to another company, a strategic buyer, or even an initial public offering (IPO). The sale can generate cash for the PE firm, which can then be reinvested into other opportunities or distributed to investors, fulfilling the primary objective of private equity to generate high returns over a defined investment horizon.

While other options may intersect with private equity activities, they do not represent direct exit strategies akin to a sale. For instance, a joint venture might involve a temporary partnership with another entity but typically does not provide an immediate return. A merger often implies a combination or integration rather than a clear exit pathway for the firm, as it may maintain residual interests post-merger. Franchising, although a business expansion strategy, does not inherently serve as an exit for the investors of a private equity firm. Hence, a sale stands out as the most recognized and effective exit strategy in this context.