Article

Is the “demise” of the private equity asset class real?

Feb. 12, 2026 · Authored by Luc Arsenault

Introduction

Throughout 2025 and into 2026, there have been numerous business articles highlighting the continuing aging of private equity (PE) portfolios and portfolio companies, low Distributions to Paid-in-Capital (DPI) to Limited Partners (LPs) and “zombie funds” (i.e., funds holding overvalued assets with limited prospects of a successful sale of those assets). These hyped headlines and stories often suggest a pending PE asset class collapse and, with it, the demise of many PE funds.

Yet that narrative doesn’t align with what we’re seeing across the market, including in conversations with PE clients. Rather than settling for faster portfolio returns, many are emphasizing strategic value creation. Despite external pressures to sell, longer hold times often reflect a focus on exit optimization (creating the most value) as opposed to exit readiness (simply being prepared to sell).

Setting the stage further

Historically, the typical PE fund portfolio company hold period of roughly five years is based on a buy-and-build strategy (i.e., organic growth + add-on acquisitions). A PE fund’s hold period can normally be broken down into two main phases:

Years 1 to ~3: Build period

This phase consists of organic growth and/or growth by acquisitions. Add-on acquisitions enable companies to expand product and service capabilities, diversify the customer base, grow the geographic footprint, improve supply chains, upgrade systems and technology and add management talent. In addition, acquisitions enable PE to drive EBITDA multiple arbitrages by buying platform companies and add-on acquisitions at a lower average EBITDA multiple than the targeted exit EBITDA multiple.

Years 4 and 5: Optimizing period

During this period, PE fund professionals and portfolio company management focus on acquisition and growth integration; upgrading financial reporting, ERP, IT and other technology infrastructure, as well as improving management depth and ensuring operational discipline to drive sustainable EBITDA.