Key Takeaways
- • Bain & Company's 2026 Global Private Equity Report counts roughly 32,000 unsold portfolio companies worth about $3.8 trillion, with average holding periods near seven years.
- • Distributions to limited partners have stayed below 15% of net asset value for four straight years, and Bain's midyear update finds LPs begin losing confidence when an exit prices more than 5% below the last mark.
- • Bain estimates a deal that needed 5% annual EBITDA growth a decade ago to reach a 2.5x return now requires 12%, and revenue growth drove almost two-thirds of buyout exit value creation from 2022 to Q3 2025.
- • DealEdge data show carve-out median revenue gains fell from about 31% pre-2012 to 17% post-2012, while margin expansion fell from 29% to 2%.
- • The author, Caitlin Hewes of OE Partners, argues that sustained (rather than embedded) operational improvements erode after leadership changes, and that buyers increasingly scrutinize how EBITDA gains were produced.
Summary
According to Bain & Company's "2026 Global Private Equity Report," private equity holds roughly 32,000 unsold portfolio companies worth about $3.8 trillion, with average holding periods near seven years. Distributions to limited partners have remained below 15% of net asset value for four consecutive years. Bain's midyear update adds that limited partners begin to lose confidence in a general partner when an exit prices more than 5% below the last mark.
With cheap leverage and reliable multiple expansion no longer doing most of the work, operational improvement now carries a larger share of returns. Bain estimates that a typical deal requiring 5% annual EBITDA growth a decade ago to reach a 2.5x return now needs 12%. Revenue growth accounted for almost two-thirds of value created in buyout exits from 2022 to Q3 2025. In carve-outs, where operational work is central to the thesis, DealEdge found median revenue gains fell from about 31% before 2012 to 17% after, while margin expansion dropped from 29% to 2%.
Hewes argues the decline reflects how improvements are generated rather than a drop in operating partner quality. Typical transformations rely on "sustainment," in which value levers, transformation offices and KPI dashboards are maintained through continuous effort. Because the underlying rules of budgeting, decision rights and incentives often favor the old way of working, gains tend to drift back once leadership attention shifts. McKinsey research cited in the piece found that about a fifth of value loss occurs after initiatives are fully executed, a figure Hewes believes is under-reported.
Hewes advocates an "embedment" approach that redesigns those underlying rules so new behaviors become the path of least resistance. She notes this is harder and more contested, as it requires decisions on authority, pay and accountability. Illustratively, a program reporting $20 million in run-rate savings that costs $4 million to $5 million a year to sustain might be viewed by a careful buyer as closer to $15 million of durable value. Hewes writes that buyers and lenders increasingly ask how EBITDA was produced and whether it can survive a change in ownership, and that improvements dependent on special governance may be treated as lower quality. Practical steps include enforcing new decision rights, moving savings into budget baselines, tying incentives and promotions to new behaviors, and embedding routines in planning calendars and systems.
With cheap leverage and reliable multiple expansion no longer doing most of the work, operational improvement now carries a larger share of returns. Bain estimates that a typical deal requiring 5% annual EBITDA growth a decade ago to reach a 2.5x return now needs 12%. Revenue growth accounted for almost two-thirds of value created in buyout exits from 2022 to Q3 2025. In carve-outs, where operational work is central to the thesis, DealEdge found median revenue gains fell from about 31% before 2012 to 17% after, while margin expansion dropped from 29% to 2%.
Hewes argues the decline reflects how improvements are generated rather than a drop in operating partner quality. Typical transformations rely on "sustainment," in which value levers, transformation offices and KPI dashboards are maintained through continuous effort. Because the underlying rules of budgeting, decision rights and incentives often favor the old way of working, gains tend to drift back once leadership attention shifts. McKinsey research cited in the piece found that about a fifth of value loss occurs after initiatives are fully executed, a figure Hewes believes is under-reported.
Hewes advocates an "embedment" approach that redesigns those underlying rules so new behaviors become the path of least resistance. She notes this is harder and more contested, as it requires decisions on authority, pay and accountability. Illustratively, a program reporting $20 million in run-rate savings that costs $4 million to $5 million a year to sustain might be viewed by a careful buyer as closer to $15 million of durable value. Hewes writes that buyers and lenders increasingly ask how EBITDA was produced and whether it can survive a change in ownership, and that improvements dependent on special governance may be treated as lower quality. Practical steps include enforcing new decision rights, moving savings into budget baselines, tying incentives and promotions to new behaviors, and embedding routines in planning calendars and systems.
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