Longer private equity holding periods: What they mean for SME business owners
Private equity deal cycles are stretching. A recent survey shows that 73 per cent of Australian PE investors now accept holding businesses for an average of 6.5 years across Asia. The era of fast flips is giving way to a focus on deeper operational transformation.
For business owners, this has direct implications. Longer holding periods mean buyers are more selective. They want assets that can withstand scrutiny, adapt to disruption, and deliver growth throughout the investment lifecycle. In short, longer holds require higher standards.
Why this matters now
MSA’s most recent market updates show a sharp divergence in global capital flows:
Private equity fundraising has collapsed to a seven-year low of US$592 billion in the 12 months to June. Even steep discounts and fee concessions have not been enough to attract new commitments.
At the same time, investors are rotating into hedge funds and digital assets, chasing liquidity, transparency, and faster returns.
Yet dealmaking momentum remains strong in selected sectors such as technology, capital markets, and climate financing.
For SME owners, this means that while capital is still being deployed, private equity is holding portfolio companies longer and demanding more from every investment. The bar for exit readiness has risen sharply.
The private equity playbook is changing
M&A as a growth lever
Seventy-four per cent of firms identify buy-and-build and carve-out strategies as central to value creation. SMEs that can show bolt-on potential through complementary products, customer bases, or geographic reach become more attractive acquisition targets.
Digital transformation is non-negotiable
Seventy-two per cent of investors see digital and AI enablement as essential for value uplift. Businesses with integrated systems, data-driven insights, and scalable platforms will command stronger multiples.
Talent is the new constraint
More than 80 per cent of investors cite talent gaps as the top barrier to executing value-creation plans. SMEs that can demonstrate strong leadership, robust succession planning, and scalable teams will stand out in competitive processes.
How MSA prepares businesses for this reality
Bridging the value gap with EBITDA+ SIX STEPS TO SUCCESS™
Through our six-step methodology, we prepare businesses to thrive under extended ownership models:
Strategic readiness: Aligning your plan with what PE buyers and capital providers value most, as outlined in The plan: unlocking business potential.
Gap analysis: Identifying where current value falls short of market expectations and closing that gap, as explained in Mind the gap: why owners should strive for higher business value.
Information hygiene: Creating clean, compelling data rooms that withstand extended due diligence, detailed in Streamline your due diligence: the power of a comprehensive data room.
Operational resilience: Strengthening EBITDA quality, governance, and scalability, as discussed in Maximising your business value: how to build a sellable business in today’s market.
Value storytelling: Positioning your business as a unique opportunity, not just another asset, a principle covered in The power of tailored marketing.
Execution readiness: Structuring deals that can deliver outcomes even in volatile markets, as explored in Mastering the negotiation game.
Actionable takeaways for SME owners
Think long-term: Would your business still excite a buyer six years from now?
Invest in digital: Upgrade systems and processes to demonstrate scalability.
Frame your bolt-on potential: Position your business within a broader buy-and-build narrative.
Close identified value gaps: Use structured analysis to address weaknesses before buyers uncover them.
Get “Game Ready”: Adopt a disciplined, step-by-step approach to maximise exit value.
Longer private equity holding periods require a different kind of preparation. If you are considering an exit in the next two to five years, now is the time to align your business with investor expectations.
At Morgan Shaw Advisory, we specialise in helping SME owners build value and prepare for sale through our EBITDA+ SIX STEPS TO SUCCESS™ program.
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