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Zombie private equity problem worsens, exits lag for US deals
By end of 2025, about 40% of US PE-backed companies, or more than $860 billion in net asset value, had been held over seven years, the highest since 2016.
A new PitchBook research piece highlights that the so-called zombification of private equity firms is worsening, with sponsors staying solvent and operational but lacking a timely path to exits and the ability to reach target returns, according to Yahoo Finance. Many of these firms have also struggled to raise new funds.
At the end of 2025, roughly 40% of US PE-backed companies had been held for more than seven years, totaling more than $860 billion in net asset value. The share marks the third consecutive annual increase and is the highest level since 2016, when exit markets were contending with a post-financial-crisis glut of companies whose value creation plans had gone off track.
The report points to a period of heavy dealmaking between 2018 and 2022, when low borrowing costs and fiscal stimulus fueled acquisitions that in some cases proved overvalued. For funds that started investing in 2021, returns at that stage were described as just 0.14x of investors' initial commitments.
PitchBook also notes that of 6,437 US PE-backed companies held for more than five years, more than half have not completed any deals since the end of 2021. According to Kyle Walters, a private equity research analyst at PitchBook, this has contributed to weak distributions and growing questions about whether “paper value” can convert to cash.
Hamza Khaldi of Elm Capital said the traditional three- to five-year hold period has effectively disappeared, calling it more aspirational than real. He suggested the timeline offered to limited partners no longer matches how long assets are actually held.