Why hold periods are growing and why operational expertise matters more than ever

Why Are Private Equity Hold Periods Getting Longer?

Over the last decade, average private equity hold periods have increased from the historical ~4 years to nearly 6 years (source: Bain & Company, PitchBook 2024). Having operated through 5 different exits, and with 7 different PE sponsors in 25 years, I have experienced this firsthand. This shift reflects a combination of macro, market, and operational factors:

1. More Complex Value Creation

Private equity has moved beyond simple financial engineering and buy & build models. Today’s deals often require deeper operational transformation, execution focus, digital modernization, and commercial repositioning, all of which take time. Sponsors are investing more heavily in supply chain overhauls, digitalization, pricing strategies, and management rebuilds.

These are not 18-month turnarounds—they’re 5+ year journeys to operational excellence.

2. Higher Entry Valuations Demand More Time to Realize Returns

In recent years, PE firms have paid higher entry multiples, particularly during the 2020–2022 deal boom. To hit target IRRs, firms now need either stronger earnings growth or longer holding periods.

With cap rate compression no longer driving returns, holding for an extra year or two helps smooth exit timing and value creation visibility.

3. Volatile Exit Markets & Timing Uncertainty

M&A and IPO windows have become less predictable, especially in cyclical or regulated industries. Many GPs are choosing to hold quality assets until more favorable macro or sector-specific conditions emerge.

2022–2023 saw a slowdown in exits due to inflation uncertainty, geopolitical risks, and rate volatility. That ripple continues.

4. Rising Popularity of Continuation Vehicles

There’s been a surge in continuation fund activity, where PE sponsors roll assets into new vehicles instead of exiting entirely. This allows them to retain exposure to high-performing assets, but extends the effective hold period.

Continuation funds now account for over 10% of total secondaries volume (source: Evercore, 2024).

5. Talent & Execution Challenges

In many sectors, especially industrial services, maritime, logistics, and manufacturing, operator talent that can navigate today's unprecedented global risks (Suez and Panama canals, tariffs, sanctions etc.) and growth pressure at the same time is scarce. The process of finding, onboarding, and empowering a high-performing management team often requires a reset of the timeline. To me, this is probably the most critical aspect in any investment - especially service businesses - and one that makes the biggest impact to the success of the portfolio company in question.

In Summary:

Longer holds are not a sign of weakness—they’re often a sign of more hands-on, value-oriented investing. But they come with an important caveat:

Only experienced operators can drive the kind of fundamental improvement and sustainable organic growth that makes longer holds worthwhile.

According to Bain, firms that deploy operationally experienced leaders in portfolio companies, especially those who’ve lived the cycles, managed crews, navigated regulatory nuance, see 22% higher exit multiples on average.

McKinsey’s research shows that more than half of total value creation in high-performing deals comes from EBITDA uplift driven by operational initiatives—not from multiple arbitrage alone.

In a world of longer holds and tighter margins, operational leadership is no longer a nice-to-have. It’s the multiplier.