Smart strategies to mitigate risk in a private equity exit

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Successful private equity exits are largely dependent on identifying opportunities and addressing complexities that can undermine value. The structures that sponsors put in place to anticipate and manage risk can determine the success of a deal.

Taking a proactive approach enables sponsors to tackle challenges early, minimizing the risk of costly delays and value erosion, and ultimately driving stronger portfolio performance.

Why early risk planning matters

Failing to proactively address risk can delay and complicate exits and erode the investment’s value. Sponsors who incorporate risk planning early in their exit process are typically better positioned to:

Reduce friction during due diligence and negotiations;
Increase deal certainty and speed for buyers and sellers alike; and
Protect value across the transaction’s lifecycle.

By anticipating potential obstacles, sponsors can streamline execution, enhance buyer confidence, and accelerate timelines — all while safeguarding returns.

Key risk tools for exits

In order to improve their exit strategy, sponsors should consider the following tools:

Warranty and indemnity insurance
(known as representations and warranties in certain regions) shifts risks stemming from warranty breaches from the seller to the insurer. Sponsors usually prepare W&I insurance as a stapled solution to streamline the process and to provide greater certainty, and transparency for both parties.

Tax insurance helps to ring-fence uncertain tax positions, limiting post-close exposure and potential for disputes.

Contingent risk solutions help to address litigation, regulatory, environmental or other contingent risks that could stall or complicate a transaction.

When implemented early and structured well, these solutions can help sponsors reduce transaction related exposure, minimize the risk of costly escrows, support a smoother bidding process, simplify negotiations and obtain broader protection as compared to an uninsured transaction.

A proactive approach to risk

Managing risk effectively enables sponsors to minimize potential repercussions that could influence investments’ valuation. The effective use of risk and insurance solutions enables sponsors to reduce uncertainty, accelerate the transaction process, and maintain a competitive advantage.

The most effective sponsors are those who integrate risk planning early, align it with their strategy, and partner with specialists who can help them navigate complex deals. Preparation today translates into smoother execution, stronger buyer confidence, and maximized value tomorrow

Confident businesswoman gesturing while discussing strategy

Product

Exit Strategies

11/07/2025