Timing drives returns in private equity. Our latest Private Equity Info analysis shows a clear shift: median holding periods are getting longer across recent vintages. More companies are sitting in portfolios longer, creating a growing backlog of assets that need to exit.
The result is structural congestion in the lower middle market, where more sellers are competing for a limited pool of buyers. Longer hold times are building exit pressure and intensifying competition across this segment.
Key Insights
Holding periods have climbed steadily as valuation gaps and cautious buyer behavior delay realizations. The median portfolio company holding period has reached approximately 6.0 years as of 2025, the longest since tracking began.
At the same time, exit pace has lagged acquisitions. With roughly 1,500 exits annually since 2011, realizations have not kept up with deployment, contributing to sustained inventory accumulation.
This is no longer cyclical. It is structural.
As inventory builds, more portfolio companies pursue liquidity at the same time. In the lower middle market, where buyer pools are smaller and transactions are relationship-driven, that concentration creates pressure.
Although Q3 2025 posted one of the strongest deal volumes in four years, exits still trail inventory growth. Industry analysis now refers to the imbalance as a 20-year exit overhang, underscoring the long-term nature of the backlog.
A structural exit overhang delays liquidity, intensifies seller competition, compresses returns, and pressures the broader private equity model.
Dry powder remains elevated, supporting entry valuations even as exit volume stays constrained relative to inventory levels.
Buyers are taking more time and prioritizing highly differentiated assets. Undifferentiated portfolios face greater scrutiny and longer timelines. In this environment, precision matters.
Sponsor-to-sponsor transactions have become a key liquidity outlet as traditional exits slow. Private equity to private equity deal flow has remained relatively steady, making it critical to distinguish which sponsors are actively deploying capital and which are still managing extended holds.
Sectors such as technology, healthcare, and industrial services continue to support repeat private equity ownership patterns, but capital is not flowing evenly across sponsors or strategies.
In a congested exit environment, data is the advantage. As more sellers compete for a smaller pool of active buyers, firms that segment the market using sector focus, recent deployment activity, and portfolio overlap can run tighter, faster, and more credible processes.
For smaller lower middle market firms without dedicated analytics teams, external intelligence can materially improve targeting precision, reduce wasted outreach, and limit process fatigue.
With median holding periods near record highs and thousands of companies held beyond traditional timelines, benchmarking duration against market medians is increasingly important.
Extended holds are no longer episodic. They reflect a structural shift. Recapitalizations, continuation vehicles, add-on strategies, and full exits must be evaluated against a persistent inventory overhang.
Precision is now the differentiator. In a crowded exit market, understanding who is actively deploying capital, how your hold duration benchmarks against peers, and where true buyer alignment exists determines whether liquidity is accelerated or deferred.