Longer PE holds may mean doing what's hard
Hold times are getting longer and exit multiples are softening. Expecting to get more for the same company later is wishful thinking. There is an upside. A longer hold gives you time to transform what the company actually is, and that can change the multiple calculation completely.
This is the real opportunity buried in a long hold, and it is easy to miss. It also takes a bold step. Transformation is a bigger job than most firms signed up for when they did the acquisition, and it needs time that was never available. You cannot rebuild a company's cost structure, data layer, and product around AI in the months before a sale. But when the sale is on hold, there may be no option other than to take on the transformation.
Kyle Roemer runs data and AI at Accordion. His warning is about the companies that let the time go to waste: "There's a bunch of service businesses out there right now that are not putting near the time and capital towards really reinventing themselves." His frame for the ones that will: disrupt yourself before someone else does it. This is the innovator's dilemma, now running at PE speed.
Jim Ferry at Volition Capital says the same thing from the investing seat. Every company founded in a non-AI world has to become an AI company and reinvent itself. Some portfolio companies are moving at that pace. Most are not. The gap between the two is going to show up at exit.
Jonty Yamisha, now CEO of Axxonsoft, describes the conversation an operator has to have. Ask what is driving the date, from the sponsor's point of view. "You said we have to hit this level of revenue and this level of EBITDA with these OKRs by August of 2028, come hell or high water. Help me understand what's driving that. Is it a continuation vehicle? Is there something in our operating agreements that says the hold period is unmovable? Is there someone with a liquidity issue?"
That question is the unlock. If the date is a hard constraint, you optimize against it and move on. If the date slipped because the exit slipped, the plan has to change to use that time to maximize value. These plans will not be easy. Transformation may require new leaders, new technology, and maybe new capital. That can be tough to get through a board and an investment committee. It may also be the best path forward.
The firms that accept that a share of their portfolio will require transformation, driven both by the economic situation and the rise of AI, will be the ones with the better multiples. They get the head start, both in landing the people they need and in the time left in the vehicle. The very best will start now.