And why the smartest sponsors are turning that delay into a value creation advantage
The dealmaking boom everyone has been waiting for has finally arrived. SpaceX just completed the largest IPO in history. David Ellison is pursuing a $110 billion deal linking Paramount with Warner Bros. NextEra Energy struck a deal to buy Dominion Energy at a valuation north of $120 billion. By nearly every measure, 2026 looks like a banner year for big deals.
Private equity, historically one of the most active dealmakers on Wall Street, is largely sitting on the sidelines watching it happen. For the third consecutive year, private equity firms are saddled with a rapidly growing number of companies they cannot sell, or take public, at the returns their investors expect.
As of June 30, 2026, private equity firms worldwide were sitting on 33,575 unsold portfolio companies, according to PitchBook data reported by the New York Times. That is up from 32,451 at the end of 2025, and more than double the 15,923 companies held a decade ago. It is the largest backlog in the industry’s history, and it is still growing.
Zoom in on just the US market and the picture is no less concerning. US-based unsold portfolio companies stood at roughly 13,325 as of the end of May 2026, up from about 12,900 the previous October, with the time needed to clear that backlog at the current pace of dealmaking stretching to around 11 years, two years longer than it would have taken just seven months earlier.
That is not a small operational hiccup. It is a structural bottleneck sitting underneath one of the most important parts of the private equity model, and it has real consequences for the executives running these companies, whether or not the fund holding their stock is thinking about an exit anytime soon.
Why the Exit Door Got So Narrow
Private equity’s traditional exit path runs through a sale to a strategic buyer or another PE firm. That path has been unusually clogged for a few converging reasons.
Higher interest rates raised the cost of the debt buyers need to finance an acquisition, which pressures the price they can afford to pay. “Buyers and sellers still have too big of a valuation gap,” said John Maldonado, managing partner at Advent International, one of the few private equity firms currently finding real success exiting its investments.
Historically, many private equity-owned companies have been sold to other private equity firms, but that important source of demand has also largely dried up as rates have stayed elevated and firms have had to direct more cash toward paying down existing debt rather than funding new acquisitions.
Layered on top of that is artificial intelligence, which has scrambled the calculus for an entire category of businesses. Software companies, long one of private equity’s most reliable hunting grounds and heavily acquired during the high-valuation years before generative AI arrived, are now a source of real hesitation. Buyers are asking a new question before any deal moves forward: what does AI do to this company’s business model in the next five years. Until that question has a clear answer, many software holdings that would have found a buyer two years ago are stuck in the portfolio.
The pressure this creates is measurable, and it is starting to show up in earnings calls. From July 2022 through March 2026, US private equity generated annualized returns of just 6.4 percent, according to MSCI, far behind the S&P 500’s 15.2 percent and the Nasdaq’s 19.3 percent over the same stretch. Apollo Global Management recently reported weak quarterly results in its private equity division, pointing to a difficult market for sales and IPOs and describing its exits as simply being “prudently delayed.” As Andrew Milgram, managing partner and chief investment officer at Marblegate Asset Management, put it, private equity is stuck largely because these companies have not delivered the returns their sponsors originally promised investors. A model built on outperforming public markets is currently doing the opposite, and that gap is exactly what is making limited partners increasingly impatient for their capital back.
The IPO Window Opened, But It Is Not the Answer Everyone Hoped For
With the sale market clogged, more sponsors are turning to the public markets instead. The first half of 2026 was the second highest-volume period for IPOs in more than a decade. Blackstone’s president called 2026 the year of the IPO on the firm’s earnings call. Madison Dearborn took defense contractor Aevex public in April after a private sale process that ran for years without producing a deal, and Jersey Mike’s, Reformation and other well-known PE-backed names have gone public in recent months as well.
But the scale tells a different story than the headlines. Since 2022, only 70 private equity-backed companies have gone public on US exchanges, according to Dealogic. From 2017 to 2021, 424 did. The IPO window that once handled hundreds of exits now handles a fraction of that, even in what is being described as a strong year for public listings.
There are structural reasons an IPO cannot absorb the backlog even when the market is open. Underwriters impose lockup periods, so a sponsor typically cannot fully sell down its position for six months to several years after the offering, and the stock is then subject to the market’s daily judgment rather than a negotiated price. Jersey Mike’s shares fell on their first day of trading. And the IPO route has historically supplied only a small share of all private equity exits, even in good years. It helps the handful of companies large enough and clean enough to go public. It does very little for the tens of thousands of smaller companies that make up the bulk of the backlog.
What This Looks Like Inside Real Portfolios
The statistics are one thing. The individual holdings behind them make the picture concrete.
Blackstone bought Ancestry.com in 2020 for $4.7 billion. Six years later, Blackstone still owns the company, and it recently renegotiated and extended the maturities on Ancestry’s debt, a move that suggests the firm is planning for a holding period longer than most PE investments run, not a near-term exit. Vista Equity Partners acquired software maker Solera Holdings for $6.5 billion back in 2016, and Solera filed paperwork for an IPO in 2024 that still has not happened two years later. Thoma Bravo, which paid $12 billion for cybersecurity firm Proofpoint in 2021, recently went back to the company’s lenders to extend its loan terms by two years at a higher interest rate rather than pointing to a defined exit timeline.
None of these are distressed companies on the verge of failure. They are, by most accounts, performing reasonably well. What they have in common is that their owners are choosing, or in some cases being forced, to keep holding rather than sell into a market that will not currently pay what the investment thesis requires.
Why This Matters Beyond Wall Street
An exit delay is not an abstract fund-level problem. It changes how a portfolio company gets run while everyone waits.
The median private equity holding period has already stretched from 4.3 years in 2017 to 5.4 years by 2024, and for the companies sitting deepest in the current backlog, the real number runs well beyond that. Every additional year on the shelf raises the bar for what the eventual exit story needs to look like, because the buyer, whoever that turns out to be, will conduct diligence on a business that has now had far longer than the original three-to-five-year thesis assumed to prove itself out.
That pressure often shows up in cost actions. This year alone, more than one hundred private equity and asset manager-backed companies filed layoff notices with state labor departments between January and mid-May, affecting close to 13,000 workers, according to data compiled by the Private Equity Stakeholder Project. Extended holding periods and constrained exits do not eliminate the pressure to show results. They redirect it toward whatever levers are still available, and workforce reductions are often the fastest one to pull.
There is a harder version of this dynamic playing out in healthcare specifically, where extended PE ownership of hospitals and physician groups has drawn increased scrutiny over staffing cuts and service line closures as owners work to stabilize financially strained assets they cannot yet sell.
None of this is a knock on private equity as a model. It is a description of what happens when the exit timeline stretches well past what the original underwriting assumed, and the fund still has to deliver a return.
Turning a Delay Into a Value Creation Advantage
This is the part that matters most if your company is sitting inside this backlog right now.
If your company sits inside a fund that is now three, five or seven years into a hold that was originally planned for three to five, the implications for finance leadership are significant, and the smartest sponsors are already changing how they think about that extra time.
An extended hold used to be treated as dead time, a period to defend against rather than use. That thinking is starting to shift. If a fund is going to be married to a portfolio company for two, three or five years longer than originally underwritten, the more productive response is not to simply wait for market conditions to improve. It is to use the additional time to build real, durable value into the business, so that whenever the exit window finally opens, the company commands a meaningfully higher price than it would have on the original timeline.
That reframing changes what good financial leadership looks like inside a portfolio company right now. The value creation thesis has to be genuinely executed, not just modeled, because there is no multiple expansion tailwind left to bail out a plan that stalls. Cash and working capital discipline become more important the longer a hold extends, since refinancing conditions have generally gotten tougher, not easier, for smaller, more rate-sensitive companies. And the company’s financial story has to hold up to a buyer’s or an underwriter’s scrutiny at any point, because nobody can predict exactly when the exit window will open, only that when it does, the company needs to be ready to walk through it, ideally with two or three additional years of real earnings growth to show for the wait.
That is precisely the environment where strong, hands-on financial leadership stops being a nice-to-have and becomes the difference between a portfolio company that is ready the moment the market turns, commanding a price that reflects everything accomplished during the extended hold, and one that spent the extra years treading water and is still explaining away weak fundamentals when it does.
Next week, we will go deeper on exactly this: how a fractional or interim CFO works hand in hand with the CEO and COO to turn an extended holding period into an opportunity, not a delay, and what that value creation partnership actually looks like in practice.
Why Businesses Trust CFOBPO
CFOBPO is a South Florida based firm providing fractional and interim CFO, Controller and COO services to private equity backed and lower middle market companies across the country. We have led post-acquisition finance work across multiple PE-backed platforms, building the financial infrastructure, reporting discipline and operational partnership that keeps a portfolio company’s fundamentals strong and its value creation plan on track, regardless of how long the hold period runs or when the exit window finally opens.
Whether you are a sponsor managing a portfolio company through an extended hold, an executive team that wants to make the most of that extra time rather than simply wait it out, or a company that needs to be genuinely exit-ready the moment conditions improve, CFOBPO provides the fractional or interim leadership to get you there.
Schedule a Free Consultation by emailing mark.cushing@cfobpo.com