Understanding Private Equity Exit Strategies

Private equity (PE) investments play a critical role in financing companies that require capital for growth and expansion. These investments are typically illiquid and characterized by their long holding periods. One common exit strategy for private equity investors is to take a company public through an initial public offering (IPO). This strategy not only provides liquidity but can also allow the private equity firms to realize substantial returns on their investments.

Consider the following statements regarding private equity exits:

1. Private equity firms typically prefer to exit through a merger or acquisition (M&A) than through an IPO.
2. IPOs are often considered a more favorable exit route due to the potential for higher valuations.
3. The timing of an IPO can be dependent on market conditions and the performance of the company.

Which of the above statements is true?