Private Equity Portfolio Company Holding Periods – Updated
Surprisingly, the median private equity portfolio company holding period has held stable at 4.8 – 4.9 years for the past four years. That is…
Covid had essentially no impact on the PE industry’s median hold period.
2021 Median Holding Period = 4.9 years
Min = 3.0 years (early 2000’s) and 3.5 years (2008)
Max = 5.5 years (2014)
A year ago, I wrote:
At first glance, this may seem surprising that COVID-effects are not more profoundly seen in the data. But there’s a good reason for this. There haven’t been that many exits to move the needle on this metric. Private equity portfolio exits are down considerably compared to recent years. With private equity firms holding portfolio companies through the COVID uncertainty, we will almost certainly see an increase in the median holding period going forward.– Andy Jones making (November 2020)… either completely wrong, or not right yet.
Comments on Historical Trends
The last two recessions (early 2000’s as well as 2008 – 2010), had a noticeable impact on the holding periods for private equity portfolio companies. Specifically, investments made just prior to the recession, at peak valuations, were held longer. Thus, the increase in holdings periods just after.
The maximum holding period peaked at 5.5 years in 2014. This is logical, because 5.5 years before 2014 represents those acquisitions made just before the 2008 recession, likely at peak valuations. These ill-timed acquisitions required longer holding periods to realize respectable returns. Consequently, median holding periods elongated, post-recession.
From 2014 – 2018, median holding periods for portfolio company exits showed a smooth downward trend.
Since 2018, median holding periods have leveled off, just below 5 years.
Want to skip hours of your M&A research and just get the answers?
Trust me… it’s pretty cool.