Insight
PE Exit Delays: When Yesterday's Oversights Kill Today's Exit Window
Some PE exits don’t get delayed because of performance or price.
They get delayed because of problems that should have been fixed years earlier. Here are some non-commercial delay drivers I see:
1. Sanctions exposure or “poison pill” assets
Operations in sensitive jurisdictions can become legally or reputationally toxic. Certain regimes can effectively block acquisitions (e.g. US/UK investment restrictions relating to Russia).
Carving out or shutting down such assets can take months, particularly where local governmental approvals are required.
2. “Historical” compliance that isn’t historical
If questionable practices are discovered but not stopped immediately, they spill into the buyer’s DD lookback period (often 5+ years).
What could have been a “cured” historical issue suddenly becomes a current one.
3. Missing governance and risk infrastructure
Buyers increasingly expect institutional basics:
- enterprise risk management
- global compliance frameworks
- clear governance and approval processes
If these structures are missing, confidence in the control environment drops quickly.
4. Unresolved high-risk disputes
Litigation or regulatory investigations create uncertainty.
Miss an early settlement window, and the buyer will compensate with price chips, escrow demands, and indemnity pressure.
5. IP and licensing complexity
In life sciences, value often sits in patents or licensing agreements.
Diligence blockers include:
- unclear IP ownership. Key IP may sit in legacy entities outside the transaction perimeter
- missing employee invention assignments
- unclear licensing chains
- internal knowledge about earlier developments has faded over time
6. Change-of-control landmines
Key contracts may require counterparty consent before a sale. Renegotiating, novating, or obtaining approvals can easily take months.
7. Carve-outs are harder than the model suggests
If the asset is operationally intertwined with the remaining group (IT systems, MAs, supply chain), separation may require substantial restructuring.
Final thought
Exit preparation begins on Day One after acquisition.
Sponsors who address structural issues early preserve optionality. Others discover them at the worst possible moment: when the exit window is already open.
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