While private equity purchase activity tripled over the last decade, acquisitions by strategic buyers remained flat. This creates a massive, underappreciated supply/demand imbalance, as strategics historically accounted for 60% of PE exits, leaving a $3.6 trillion backlog of unsold companies.
The inability to return capital to LPs constrains new fundraising, creating an environment that cannot support the thousands of PE funds operating today. This will trigger a shakeout of weaker GPs, while the top 10 funds, already capturing 36% of capital, further consolidate their dominance.
With exits taking longer and becoming scarcer, the traditional 10-year, finite-life fund model is poorly suited to the current market. This structural problem is forcing the industry to rely more on liquidity solutions like secondaries and continuation vehicles, fundamentally altering the PE business model.