With more than 30,000 portfolio companies waiting for an exit, private equity faces a readiness challenge as much as a market challenge.

In this interview at SuperReturn International, EY’s Konstanze Nardi, Global Exit Readiness Leader, and Cord Stümke, Europe West Private Equity Leader, explain why companies must prepare earlier, demonstrate tangible value creation and make AI part of a credible equity story.

Private equity’s exit backlog is growing

Exit markets remain under pressure. According to EY’s latest global exit readiness study, more than 30,000 companies are currently held by private equity. Average holding periods have increased to six years, while 35% of those businesses have been held for longer than six years.

The backlog has grown because exits have failed to keep pace with deal activity. For Nardi, this means portfolio companies cannot simply wait for time to pass or market conditions to improve.

It has moved from being reactive to proactive.
Konstanze Nardi, Global Exit Readiness Leader, EY

Companies need to be ready when the window opens

Short-term macroeconomic and geopolitical developments are making market conditions harder to predict. Depending on the intended exit route, the opportunity to complete a transaction can be narrow.

Stümke argues that the question is no longer when a company should become ready for an exit. Instead, it should be prepared to exit at any time.

That requires exit planning to begin much earlier. EY’s study indicates that starting the process 12–24 months ahead can help drive better valuations, smoother execution and greater flexibility to capture an exit window when it appears.

Nardi describes exit readiness as a continuous strategic discipline—one that should begin at the point of investment, with managers already considering what will need to be in place when the time comes to sell.

AI is now part of the equity story

AI has also become an increasingly important consideration for prospective buyers. According to Stümke, the conversation has moved beyond technology and into the company’s wider equity story.

Buyers are assessing two key areas: whether a company can implement AI to drive growth and margin expansion, and how exposed that company may be to AI-driven disruption within its market.

Simply launching or discussing AI initiatives is no longer enough. Buyers want to see embedded use cases and a proven record of how those applications translate into EBITDA.

Management teams must therefore be prepared to explain the role AI plays across the different components of the equity story.

Buyers want evidence of value creation

Demonstrating value creation has also become more important. EY’s study found that, in the view of GPs, the importance of proving value creation has doubled.

Stümke identifies clear evidence of value creation as a key driver of valuation. It can help protect value while also making the timing and outcome of an exit more predictable—particularly when markets are fluctuating in response to factors outside a manager’s control.

Alignment between GPs and management teams is critical. Both sides must be ready to communicate the challenges facing the business, the action taken and the results achieved.

Preparation creates opportunity

Despite the challenges, Stümke sees positive sentiment across the market, including a willingness to invest, available capital and a continued focus on emerging opportunities.

For Nardi, the central message is simple: prepare early. By engaging management teams and advisers before the process begins, managers can address potential challenges and ensure the business is ready when the right exit window opens.