Private Equity Firms Prepare for Massive Portfolio Clearout in 2026

Benzinga·12/28/2025 19:46:02

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Private equity firms are preparing for a significant portfolio clearout in 2026, following a year of progress in offloading old investments.

According to a report, the private equity firms have been dealing with a surplus of unsold companies for several years. This has resulted in investor dissatisfaction and challenges in securing new funds.

The number of companies in private-equity portfolios rose from the previous year, reaching approximately 12,900 U.S. companies as of September 30, 2025.

The average hold period, the duration between acquisition and sale, is nearly seven years. This is a decrease from the 2023 peak but still higher than pre-pandemic levels. After a period of aggressive buying, higher interest rates in 2022 made debt-funded buyouts more costly, effectively halting the buying frenzy.

Firms are now reluctant to accept lower returns on companies purchased at high valuations during the boom, reports The Wall Street Journal.

Also Read: How to Start Investing in Private Equity

As of September, U.S. private equity firms had about $880 billion in undeployed capital, according to PricewaterhouseCoopers. This is a decrease from a record $1.3 trillion in December 2024.

However, a revival in the deal market increased the overall value of global private-equity sales or initial public offerings by more than 40% in 2025.

Executives expect more offloading of older investments in 2026. A surge in initial public offerings provides an exit strategy for private-equity firms. High-profile private companies, including SpaceX and artificial-intelligence startup Anthropic, are considering listings.

The anticipated clear out in 2026 is a significant development for private equity firms. The backlog of companies has been a long-standing issue, causing investor frustration and hindering the raising of new funds. The expected increase in offloading of investments, coupled with the boom in initial public offerings, could provide a much-needed exit strategy for these firms.

High-profile companies considering listings could further stimulate this trend, potentially leading to a more dynamic and fluid private equity market in 2026.