Private equity funds are temporary investors. A private equity fund already plans its exit when entering into the financing of a portfolio company. Such an exit is regularly achieved by selling the investment to a strategic buyer(trade sale) or another private equity fund(secondary buyout), or alternatively via an IPO. With regard to the exit, a distinction must be made between the sale of a portfolio company(single exit) and the sale of all or the last portfolio company, which ultimately leads to the closure of the fund.

The top maxim of a private equity investor is: "Cash is King". Only what the private equity fund earns on exit (i.e. the purchase price that is available to it in real terms) can be returned to its investors. The performance of the private equity fund is therefore measured by the cash flow. Measures that lead to an improvement in cash flow at exit therefore always lead to an improvement in performance. There is an information gap at each exit. The selling private equity fund regularly had full information about the business development of the portfolio company to be sold over a longer period of time. However, it should be noted that the private equity fund itself is usually not involved in the day-to-day business and must rely on the information provided by the management, which normally changes sides, when selling the portfolio company.

On the other hand, the buyer regularly receives only a limited insight into the portfolio company to be acquired as part of the due diligence process. However, it should be added that, depending on the scope and time of the due diligence, this insight may be more comprehensive than the level of knowledge at the selling private equity fund.

This information gap gives rise to certain provisions in the company purchase agreement which have long been standard and are intended to compensate for the buyer's information deficit:

• Warranties and guarantees (reps & warranties)
• Tax indemnities (tax indemnity)
• Indemnities for environmental issues (environmental indemnity)
• Indemnities for litigation
• Indemnities for other risks identified in due diligence

However, the regulations alone are not sufficient to protect the buyer from disadvantages resulting from its limited knowledge of the portfolio company to be acquired.