A common notion about private equity is it is a “buy and flip” mentality. In effect, the sequence is 1) buy right, 2) optimize operations and 3) make strategic add-ons. Sell is optimally dictated under a defined holding period, hopefully benefitting from an improved bottom-line and/or multiple expansion.

Of course, it is never this simple and there are many different buy, hold and sell strategies and timelines. Each overlaid by the participating firm’s unique cultural and partnership approaches.

Nevertheless, it is always instructive to see how macro conditions are impacting private equity – a major player in the capital markets ecosystem.

According to a recent article by Private Equity Info, the median holding period for private equity-backed portfolio companies has reached 5.7 years, the highest value since tracking began in 2000.

The net impact is a slower pace of exits, leading to longer holding periods and delayed capital returns to limited partners. As such, private equity firms may face challenges in fundraising. The article goes on to suggest the slower return of capital and fundraising may impact M&A activity (and deal valuations). How this bares out going forward remains to be seen, but it’s certainly a dynamic worth monitoring given private equity’s large role in M&A environment.