Private Equity Is Stuck With 33,575 Unsold Businesses

The long-awaited deal-making boom has finally arrived. SpaceX set a record for the world’s largest initial public offering. David Ellison is pursuing a $110 billion deal linking Paramount with Warner Bros. The utility firm NextEra Energy has struck a deal to buy Dominion Energy that values it at more than $120 billion.

But private equity — a deal-making machine for decades — is largely sitting on the sidelines. For the third consecutive year, private equity firms are saddled with a rapidly increasing number of companies that they cannot sell or take public at the returns their investors expect.

As of June 30, private equity firms had 33,575 unsold companies in their portfolios, according to PitchBook, an industry data firm. That’s up from 32,451 companies at the end of last year and 15,923 companies a decade ago.

The growing backlog is a challenge for private equity’s core business model. Typically, such firms aim to buy a company, often add large amounts of debt to its balance sheet, improve its financial performance and then sell it for a profit, usually within five to seven years.

The state of limbo has been difficult for large investors like pension funds and endowments that have spent decades paying steep fees to private equity firms promising market-beating returns. Some investors and industry professionals are worried that the firms won’t be able to sell companies without taking big losses.

“Private equity is stuck because those companies have failed to fulfill their value promise,” said Andrew Milgram, a managing partner and chief investment officer at Marblegate Asset Management, an investment firm.

As the backlog grows, private equity firms continue to underperform the broader stock market. From July 1, 2022 to March 31, 2026, U.S. private equity firms generated annualized returns of 6.4 percent, according to the most recent data from MSCI, an index firm. That’s far below the 15.2 percent annualized returns of the S&P 500 and the 19.3 percent of the Nasdaq during the same time period.

There are several reasons for the logjam. Higher interest rates have made it difficult for private equity firms to find buyers that rely on cheap debt to finance acquisitions.

Another challenge is the weakness in the software sector, where there is a heavy concentration of private equity-owned companies. The value of many software firms has declined, as investors worry that artificial intelligence will cut into future earnings.

Historically, many private equity-owned companies have been sold to other private equity firms. But that important source of demand has also largely dried up.

When the Federal Reserve held interest rates low and debt was cheap, it was relatively easy for a private equity firm to write small checks and borrow heavily to purchase a company. But since the Fed began raising interest rates in 2022, private equity firms have needed more cash to pay down debt at the higher rates. That means the firms are not willing to spend as much to purchase companies, which drives down their valuations.

Last week, the investment behemoth Apollo Global Management reported weak quarterly results in its private equity division. The firm specifically pointed to a tricky market for company sales and I.P.O.s as a reason for its lower performance returns in that part of the business, saying exits were being “prudently delayed.”

“Buyers and sellers still have too big of a valuation gap,” said John Maldonado, managing partner at Advent International, a private equity firm.

The delays are becoming the new normal. For years now, private equity firms and their bankers have promised a rebound in either selling the businesses they own or taking them public. Such an outcome has proved elusive.

Elizabeth Cooper, global head of private equity at the law firm Simpson Thacher & Bartlett, said that going into this year, she had “a whole stable of companies” she had thought would be sold in the early part of the year. They’re still waiting.

“Everything basically got reset,” Ms. Cooper said, pointing to continued high interest rates and volatility in the stock market and politics.

Some private equity executives say the backlog may not end up being a big problem, because some companies that have taken longer to sell could ultimately generate large returns.

Still, the private equity struggles contrast sharply with the investments that venture firms — another giant source of money in private companies — have made in A.I. pioneers like OpenAI, Anthropic and SpaceX, which are generating seemingly once-in-a-lifetime returns.

The first half of 2026 was the second highest-volume period for initial public offerings in more than a decade.

But for many private equity firms, I.P.O.s have not been a viable path to selling their businesses.

Since 2022, only 70 private equity-backed companies have gone public on U.S. exchanges, according to the data firm Dealogic. From 2017 to 2021, 424 private equity-backed companies did so.

Software companies are some of the most troubled parts of the pipeline.

Many private equity firms gorged on such businesses in 2021, before the advent of ChatGPT, when software companies were trading at all-time highs. Because the exit of these companies in the current environment could lead to painful losses, many private equity firms are waiting to sell them.

In 2021, Thoma Bravo, a private equity firm invested heavily in software, bought Proofpoint, a cybersecurity software business, for $12 billion.

Thoma Bravo recently engaged in negotiations with the company’s lenders and extended the terms of its loan by two years, paying higher interest rates to do so, according to a person familiar with the deal. On calls with lenders, the person said, Proofpoint and Thoma Bravo executives said they would consider taking the company public in the coming years. But by this point in an ownership cycle, many private equity firms would try to have a clearly defined path and timeline for either an I.P.O. or a sale, rather than seeking ways to amend and extend their debt holdings.

Other companies have been lingering even longer.

The giant private equity firm Blackstone bought Ancestry.com in 2020 for $4.7 billion. Six years later, Blackstone still owns the company and recently renegotiated and extended the maturities on its debt, suggesting that the firm expects an even longer holding period.

“This is a standard refinancing transaction for a highly successful investment that we’ve only owned for around five and a half years,” a Blackstone spokesperson said. “It does not indicate our future plans for the business.”

Vista Equity Partners, another private equity firm, acquired Solera Holdings, a software maker, for $6.5 billion in 2016. The company filed for an initial public offering in 2024, but it hasn’t materialized.

A representative for Vista Equity declined to comment.

Many in the industry predict that private equity firms will eventually be forced to sell and give cash back to investors, even if it means accepting a lower price.

Advent International is the rare private equity firms finding many exits. This year, it has sold several companies and taken others public, returning billions of dollars to its clients.

Mr. Maldonado, a managing partner at Advent, said he expected that other firms would have to follow suit because investors simply needed money back.

“I wouldn’t underestimate the amount of effort that’s going into dealing with the new reality and coming up with solutions that will allow firms to exit these blockets,’’ he said.