Private equity is entering the part of the film where the easy tricks stop working.
McKinsey’s 2026 private markets report is a nice way of saying the old private equity playbook is starting to look a bit dead. Deal value was up, yes. Everyone can clap for the rebound. But the number of deals fell, entry multiples hit a record 11.8x EBITDA, more than 16,000 companies have now been held for over four years, and the average hold period is above 6.5 years.
Translation: firms are paying more, owning assets longer, and calling it a recovery.
The most provocative part is the bit the industry usually hides in the appendix.
Between 2010 and 2022, 59% of buyout returns came from leverage and multiple expansion, not from anyone being especially clever operationally. That game is fading. Buyout returns in 2025 were about 7% versus 18% for the S&P 500 and 22% for MSCI World. Five year rolling DPI as a share of AUM hit its lowest recorded level in 2025. So LPs are being asked to admire PowerPoint value creation while waiting longer for actual cash. Lovely stuff.
McKinsey is also basically admitting that value creation is no longer optional theatre for the annual meeting. It has to do the heavy lifting now. Operating teams have more than doubled in size since 2021. AI is moving from innovation cosplay into underwriting, diligence, pricing, sales productivity, support and back office automation. And continuation vehicles are not some side show anymore. They are becoming part of the plumbing. The report even hints that the traditional five year hold period is in the rear-view mirror.
This is the real message. Private equity is not broken. It is just becoming less forgiving. Scale matters more. Specialisation matters more. Real operators matter more. The firms that built their model on cheap debt, multiple expansion and a decent haircut in the CIM process are about to discover that none of those are a strategy.
Welcome to modern PE. More expensive entries. Slower exits. Lower liquidity. Higher expectations. Actual work.
