While a successful exit in the world of private equity (PE) has many elements, the preparation process—which starts from the moment the asset is acquired—may be the most important.
Over the past few years, the industry has faced a raft of challenges, from high financing costs, volatile equity market, and rigorous buyer scrutiny to uncertainty around input costs (from raw materials to labor) and the sustainability of earnings due to US tariffs. As a result, many PE firms have had to delay or restructure exits as sponsors and acquirers reassess pricing, timing, and risk allocation.
According to McKinsey’s Global Private Markets Report 2026, the backlog of companies ready to exit but on the books for longer than four years is estimated to be 16,000 globally. This is equivalent to 52 percent of total buyout-backed inventory as of 2025—the highest on record and ten percentage points higher than the past five-year average. The average global holding period for portfolio companies has also reached a historic high of 6.6 years.1
This environment makes the ability to prepare in a timely manner and execute successful exits a defining factor separating top-performing PE funds from their peers. We have published extensive research on best exit practices. These steps continue to be as important as ever. In recent years, the margin for error in exits has narrowed further: Outcomes are less predictable, exit routes more fragile, and delays more common. A successful exit requires disciplined preparation and flexibility—practices that need to be applied earlier and more consistently throughout the holding period.
Here’s how PE firms can get started: They can think about the potential path to exit at the acquisition phase and sequence exits strategically to align with the fund’s overall liquidity goals. During the asset’s holding period, firms can develop clear plans to propel growth and operational efficiency, including actively using AI to develop exit strategies.
Seven strategies for successful exits
In 2025, the total PE exit count was down 15 percent, while the total exit value experienced a rebound with a 41 percent increase compared with 2024, highlighting the role of larger deals.2
However, the valuation gap between buyers and sellers has widened materially since 2022, making it harder to close deals and prompting negotiators to resort to earn-outs and adjustments to bridge price mismatches. Although the bid–ask spread started to modestly narrow in 2024,3 it continues to affect global exit activity. With some sponsors delaying exits in search of pricing alignment, holding periods have extended beyond historical averages. In 2025, the average holding period of 6.6 years lags behind the 6.1-year average observed between 2011 and 2020.4
PE firms are using a range of strategies to increase the likelihood of a sale in these conditions. Trade sales, for example, represented approximately 60 percent of European PE exits in 2025—the highest in ten years and up nearly ten percentage points from 2015.5 Sponsor-to-sponsor deals also accounted for a higher share of exits compared with a decade ago. Conversely, IPO activity was muted, with fewer than ten deals annually since the 2021 peak. PE firms also opted to sell well-performing assets first: Assets sold in 2024 and 2025 had median revenue growth two to three percentage points higher than that of assets remaining in the portfolio.6
Continuation funds have also become a go-to option for some sponsors seeking liquidity without selling an asset to a new owner. Although these transactions can provide flexibility when market conditions or pricing are not supportive of a full exit, they also carry risks, including valuation scrutiny, potential alignment issues with LPs, and the need for a clear and credible value-creation plan (VCP) to support the reset ownership structure.
To defend their assets’ asking prices and reduce execution risk, PE firms need to thoroughly prepare and clearly position their assets for a sale. Seven practices, in particular, are fueling exit success among leading PE firms.
Embed exit plans into the acquisition process
Leading firms start thinking about exits at the time of acquisition, linking the investment thesis and target holding period to the planned exit strategy and developing the paths to value creation and exit in parallel rather than as separate workstreams. Many PE firms now continually monitor the asset’s exit readiness and revisit their initial exit plan periodically (often every six to 12 months) to keep it aligned with the asset’s growth trajectory and shifting market conditions. In parallel, they formalize exit-readiness plans 12 to 18 months ahead of a planned divestment to test the timing, identify areas where they can create more value, and address roadblocks.
Allocating time to plan exits while managing day-to-day asset strategies may not be easy. Preparing for exits early also requires disciplined portfolio monitoring, reliable performance data, and strong alignment between the deal teams and operating partners. Although resource intensive, embedding exit planning from day one can improve exit readiness, reduce late-stage value leakage, and increase execution certainty when sponsors ultimately go to market.
Establish rigorous exit governance and planning
Firms that succeed in selling assets in the current environment plan exits at the portfolio level, aligning individual transactions with fund-level liquidity goals. They treat exits not as isolated events but as part of an integrated capital rotation plan, releasing capital from mature assets to fund new investments while protecting fund-level performance metrics.
These firms set explicit exit benchmarks, such as distributions to paid-in capital (DPI) targets, which can guide the pacing and sequencing of exits to ensure that distributions are in line with LPs’ expectations. They regularly refresh their exit timelines—weighing the potential for additional value creation against the urgency of delivering liquidity to LPs by smoothing out DPI delivery and avoiding multiple exits occurring simultaneously. This can reduce the risk of a forced sale in unfavorable markets.
They also develop a robust governance model. For example, some firms have a dedicated “exit committee” that supports the “fund-level view” and keeps various deal teams accountable. This committee includes senior leadership of the fund, deal partners, and members of the operations team. The portfolio company’s management is asked to regularly report on the company’s operational maturity and readiness for exit. And every three months, they evaluate the exit readiness “score card” for each portfolio company to determine the future course of action.
Map the universe of potential buyers
PE firms that identify likely buyers for their assets early in the investment life cycle are often better positioned during the exit process. Effective buyer mapping starts with identifying a shortlist of potential acquirers (whether corporations or other PE firms) or ideal IPO windows immediately after acquisition. These firms maintain contact with the management of potential buyers throughout their ownership of the asset, even sharing updates on the asset’s progress. Some firms also adapt their exit positioning to buyer priorities. A corporate buyer, for example, may emphasize synergies and adjacencies, while financial sponsors are likely to seek uncaptured upside from a potential acquisition.
Systematic buyer mapping can be a challenging task. Maintaining engagement with potential buyers over multiple years can burden teams focused on value-creation work. Additionally, it may be difficult to gain access to decision-makers at buyer organizations, and buyers’ priorities often shift with market cycles and geoeconomic conditions. For example, several PE firms report that US tariffs cooled interest from foreign companies that were initially identified as likely acquirers, prompting them to refocus their buyer universe toward domestic sponsors.
In today’s more uncertain exit environment, leading sponsors increasingly plan for multiple exit paths rather than relying on a single buyer universe. They recognize that pricing gaps or limited buyer appetite may delay or derail a sale and develop credible alternatives early on (such as pursuing additional acquisitions to build scale, repositioning the asset for an IPO, or extending the holding period with renewed value creation).
Develop a value-creation plan based on the investment thesis and leave room for the next buyer
Growth and profitability remain the strongest determinants of exit success. Across Europe over the past six years, assets growing at more than 25 percent CAGR have sold at roughly a 50 percent premium relative to assets growing at less than 5 percent,7 and higher EBITDA margins also correlate with stronger valuations.
To spur growth and operational efficiency, leading PE firms create detailed VCPs that link the investment thesis to specific initiatives (such as cost optimization, digital transformation, or new product launches) and tangible results. For example, PE firms increasingly recognize that they can improve asset profitability and exit valuations by keeping operational value creation at the forefront of their investment approach. In fact, around 54 percent of the overall revenue growth from a PE deal is said to be generated through value-creation initiatives, 32 percent through multiple expansions, and the remaining 14 percent from margin improvement.8 Such enduring growth can support the deal’s valuation, without the PE firm needing to rely primarily on assumptions that the market will assign the business a higher multiple at exit.
A successful VCP can translate the investment thesis into clear, actionable initiatives. It focuses on a small set of KPIs (such as order intake, recurring revenue growth, customer retention, or margin expansion) that demonstrate how the operational progress is translating into enterprise value and can be validated by prospective buyers during their diligence process.
Some PE firms may deliberately leave a few value-creation opportunities untapped. During the exit phase, for example, they may showcase in vendor due diligence (VDD) that they completed only the first phase of their cost-efficiency VCP, while mapping out the second phase to show a credible runway for future value creation for the next buyer.
Launch value-capture sprints in the final stages of ownership
Around 12 to 18 months before a planned divestment, PE firms can accelerate initiatives that demonstrate growth momentum and reinforce the exit story. These “value capture sprints” often focus on levers that deliver visible impact quickly, such as pricing adjustments, cost efficiencies, or sales process improvements. The aim is twofold: capturing incremental value for the current owner and highlighting untapped opportunities for the next owner.
Most buyers look for credible growth paths in assets they are considering. Typically, growth initiatives need to be launched two years (or even earlier) prior to an exit for their impact to materialize by divestment time (cost-saving measures can be launched later in the cycle). Sponsors can bolster buyer interest and justify premium valuations by showcasing initiatives that require limited investments to create performance improvements (for example, introducing a targeted digital pricing or cross-selling tool that lifts average revenue per customer without requiring major system changes).
The impact on returns can be meaningful. Primary value creation, which is typically done in the first 18 to 24 months to achieve structural performance improvements, can lift an asset’s total equity value by 20 to 50 percent. Meanwhile, value-capture sprints executed closer to exit time can add an additional 10 to 25 percent to equity value.
Highlight AI readiness and potential
During the diligence process, buyers are increasingly assessing AI readiness and risks across a selling entity’s business functions, including marketing, sales, finance, and product (where relevant). However, many portfolio companies lack a clear AI strategy or operating setup. Barriers include unclear value pools, limited AI talent and data, and execution failure. This often results in fragmented experimentation rather than deliberate decisions on AI product features or the implementation of agentic workflows (for example, in B2B sales).
Successful sponsors take a structured approach to AI readiness across three areas:
- Strategy. Define a clear AI road map with quantified cost and revenue impact across priority use cases and journeys. Each business function (product, marketing, sales, finance, and HR) can have its own road map, with an overall company-wide prioritization plan for the next six, 12, 18, and 24 months.
- Talent and operating model. Establish a scalable AI operating model with clear roles and targeted hiring, as needed. Set up a governance model for continuous reprioritization of that talent aligned with the prioritization of use cases and journeys. Portfolio companies may also make certain design choices, such as whether to have a center of AI excellence or embed talent within different functions.
- Technology, data, and execution. Implement priority use cases and agentic workflows ahead of the exit to demonstrate readiness of the tech stack and show how value can be created.
Tap third-party advisors and specialists
Advisors and investment banks can be valuable partners in the exit process. PE firms use advisors to help shape assets’ equity stories, conduct market and customer analyses, and stress-test business plans. They also involve advisors in preparing management teams for buyer engagement through Q&A sessions and investor workshops.
A PE firm may also commission a third party to produce VDD to build buyers’ confidence and shorten their diligence cycles. Effective VDD reports integrate forward-looking business plans with analyses of the market outlook, customer dynamics, and operational performance, and are updated in case of transaction delays. These reports ideally need to quantify the improvements achieved during the holding period.
A successful exit today requires more than timing the sale to favorable markets. Leading PE firms set up fund-level exit governance, define divestment plans across the portfolio, and accelerate targeted initiatives in the final stretch of ownership, including AI readiness. Funds that can align fund-level objectives with asset-level execution are better positioned than their peers to navigate liquidity challenges, deliver timely distributions, and generate stellar performance.
