Extended holds are reshaping the Executive proposition in PE

By Tom Orr, Founder and Managing Director, Orr Search.

There is a conversation happening in private equity boardrooms that rarely makes it into published commentary. It is not about deal multiples or exit timing. It is about the people running portfolio companies, and whether the incentive structures and leadership models that worked in a five-year hold still make sense when the hold stretches to seven or eight.

Most of the published analysis on extended holding periods focuses on financial mechanics: valuations, distributions, dry powder, continuation vehicles. That is understandable. But it misses something important. The harder, quieter problem is what happens to leadership quality, executive retention, and succession depth when the timeline shifts and no one adjusts the model to match.

The hold period problem is bigger than most acknowledge

The numbers are now well established. McKinsey’s 2026 Global Private Markets Report found that more than 16,000 companies globally have been held for more than four years, equivalent to 52% of total buyout-backed inventory, the highest on record. The typical portfolio company is now held for more than six and a half years on average. BDO’s research found that 84% of PE firms are experiencing longer holds than they were in 2024.

These are structural numbers, not cyclical ones. The conditions that drove them, high entry multiples, elevated interest rates, and constrained exit markets, have not fully reversed. For most PE firms, an average hold well above five years is now the operating assumption, not the exception.

That matters enormously for talent. Because the executive incentive model that underpins most PE-backed leadership packages was designed around a different assumption entirely.

The equity trade-off no longer works the way it should

The classic proposition to a PE-backed executive is straightforward: accept lower guaranteed cash in exchange for meaningful equity upside at exit. It is a compelling offer when the exit is three to five years away and the growth trajectory is clear.

When the hold extends to six, seven, or eight years, that proposition starts to unravel. Standard equity vesting schedules, typically structured around four to five years, have run their course long before the exit arrives. The cash compensation that was always slightly below market rate has compounded over time. And the exit, which was supposed to represent the payoff for years of intense, high-accountability work, remains uncertain in timing and outcome.

AlixPartners’ Eleventh Annual PE Leadership Survey, published in 2026 and drawing on responses from more than 420 PE firm and portfolio company leaders, captures the consequence clearly. Unplanned CEO turnover spikes around year two of a hold, driven by misaligned expectations and performance gaps that were not caught early enough. That pattern alone is well documented.

What is less discussed is the quieter attrition that builds as holds extend: executives who stay but disengage, leadership teams where the original energy has dissipated, and succession benches that were never built because everyone assumed the exit was closer than it turned out to be.

The same survey found that 44% of portfolio company leaders report a higher risk of losing top performers. In a longer-hold environment, that is not a temporary retention challenge. It is a structural one.

Succession is where the gap shows up most visibly

Most PE-backed companies are not well prepared for leadership transitions, even though those transitions are highly likely. AlixPartners’ data shows that CEO turnover spikes are largely driven by the PE firm itself, and that when a CEO change happens, the organisation is rarely ready. The CFO and COO are typically equally exposed, with no credible internal successor identified for either role in the majority of cases.

That is a governance problem. But it is also, more fundamentally, a talent strategy problem. The firms that navigate extended holds well are the ones that treat succession as a continuous process rather than an emergency response. They know who their number twos are. They actively develop them. And when the time comes to make a change, they are not starting a search from scratch mid-hold; they are making a considered transition that protects momentum rather than disrupting it.

This requires a different relationship between the PE firm and the search function. Not a transactional one, activated when a vacancy arises, but an ongoing one, where there is a shared understanding of the leadership needs at each stage of the hold and a plan for how to meet them.

What the best firms are doing differently

The Accenture analysis of PE trends in 2025 made an important observation: the firms solving the talent challenge in a longer-hold environment are thinking beyond the C-suite. They are extending equity participation further down the organisation, building incentive structures that reflect the reality of a longer journey, and investing in the network and development opportunities that make a PE-backed role genuinely attractive even when the exit timeline is uncertain.

From our own experience working across PE value creation mandates, the distinction between firms that retain strong leadership through a longer hold and those that do not often comes down to one thing: whether the GP treats the executive team as partners in the value creation journey, or as resources to be deployed and replaced when performance disappoints. The former builds resilience. The latter creates churn, and churn in a longer hold is particularly costly.

The talent supply side deserves more attention

Almost everything written about this problem focuses on what GPs and boards should do differently. That is the right instinct, but it overlooks something equally important: the executive talent pool itself is adjusting to the new reality.

The best PE-experienced executives are more forensic than they were five years ago about the equity structures they accept, the governance frameworks around them, and the realism of the exit thesis before they commit. They have seen what a poorly structured incentive looks like when the hold extends. They are asking harder questions earlier. And they are walking away from roles that do not pass that scrutiny.

That is a healthy development for the market. It puts pressure on PE firms to be more honest and more creative about how they structure executive propositions. And it raises the bar on what a well-constructed search process needs to do: not just find the right person for the role, but present the opportunity in a way that is credible and competitive in a market where the best candidates have choices.

Extended holds are not going away. The firms that treat that reality as a prompt to rethink their approach to executive talent will be better positioned for it. Those who carry on as before will find the problem compounds quietly, until it becomes impossible to ignore.

Orr Search is the executive search partner for private equity value creation. We work exclusively across Portfolio Operations, Finance and M&A, Data and AI, Human Capital, Transformation, and Strategy. If you are thinking about an executive hire in your portfolio, get in touch.

Sources

Author:

Tom Orr