“The median holding period for private equity portfolio companies has grown significantly in recent years,” says the introduction to the just-published Private Equity Exits Report, 2012 Annual Edition, available through co-authors PitchBook and Grant Thornton:
For companies exited in 2011, the median holding period was 4.81 years—25% higher than for investments exited by the end of 2008. This creates a great need for exit activity to increase. Interestingly, however, the record capital overhang [leftover from investments prior to the financial crisis] has the potential to be part of the solution in the form of secondary buyouts. If this were to happen, it wouldn’t change the overall inventory but would improve the median hold period.
The new report takes a close look at the inventory levels of specific industries to determine which, if any, industries are “hot,” or if the number of exits in any given industry is merely proportional to the overall inventory. Even more pressing: Does the study predict whether the worst of the economic crisis is behind us? “When we launched our first joint report,” say the collaborators, “we were as eager as everyone else to dig into the data to see if we could find an answer. As is often the case, the resulting report raised more questions than it laid to rest, some of which we have tried to explore in this second issue of the report while at the same time raising new and larger questions.”
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