We reported in July that private equity firms are delaying exits and holding portfolio companies longer to ensure they achieve the desired ROI from their investments.
The median holding period for private equity-backed portfolio companies is 5.7 years, the highest value since Private Equity Info began tracking this metric more than two decades ago.
Pulling data from our M&A Research Database, the chart below shows currently held portfolio companies by vintage year, the year that each was acquired.
In 2021 and 2022, private equity acquisitions reached unprecedented levels, primarily due to government stimulus and historically low interest rates. The peak in acquisition activity for these years is reflected in the current data.
However, with many financial and strategic buyers vying for the same opportunities, valuations skyrocketed, leading to concerns that some firms may have overpaid during this period.
With rising interest rates since then, private equity firms face higher debt servicing costs than initially projected, which could result in them holding on to portfolio companies from those peak years longer than usual.
The graph above also shows a lingering effect for companies acquired in 2007 and 2008, just before the Great Recession. It’s likely that acquisitions from 2021 and 2022 will continue to appear prominently in the data for the next 15 years as well.