The average European private equity hold period has reached 6.1 years, the longest recorded since tracking began. For context: that is nearly double what the industry modelled as standard a decade ago. The financial architecture of PE has adapted to this reality. The approach to leadership talent, in most portfolios, has not.
That gap is expensive.
The Team You Hired for a 2023 Exit Is Running a 2026 Business
When a sponsor makes an entry, the management assessment is built around a specific thesis: a three-to-five-year ownership plan, a target EBITDA trajectory, a likely exit route. The CEO, CFO, and leadership bench are evaluated against that plan.
What happens when the plan shifts by two or three years? The macro environment changes. The operational requirements evolve. The competitive landscape looks nothing like the due diligence pack. And the person who was precisely the right hire for the 2021 thesis may be the wrong person to execute the revised 2026 one.
This is not a hypothetical. It is the operational reality for a significant portion of European PE portfolios right now.
Research published earlier this year found that over 70% of CEOs at PE-backed companies are replaced during the average holding period, with 55% of those changes unplanned. That figure deserves closer examination. Unplanned CEO changes are not just disruptive; they are a signal that leadership assessment has lagged behind business reality. They happen because the conversation about fitness-for-purpose was deferred until the problem was too visible to ignore.
What Extended Holds Are Exposing
Three patterns have become consistent across European portfolios operating in extended hold environments.
The first is founder fatigue at the leadership level. Many businesses that entered PE ownership in 2019 to 2021 came with founder-adjacent management teams: founders stepping into chair roles, long-tenured operators promoted to C-suite positions, executives who had grown with the business rather than been hired for scale. Those leaders were appropriate for the entry context. Five or six years in, with a buyer requiring proof of institutional-grade leadership, the assessment looks different.
The second is CFO obsolescence. The CFO who was credible in a period of low-cost debt and predictable cash flow does not always have the toolkit for a period of tighter credit, covenant scrutiny, and narrative-driven board reporting. Mid-cycle CFO change has become markedly more common across European mid-market portfolios. Sponsors who make that change proactively, rather than reactively, preserve the quality of the exit story. Those who delay often find themselves rebuilding financial credibility under time pressure.
The third is the succession planning vacuum. Only 16% of PE-backed company board members treat CEO succession as a genuine operational priority. Fewer than two in five portfolio companies carry out regular performance assessments of their senior leadership. A quarter have any formal succession programme at all. In a four-year hold, these gaps are manageable. In a six- or seven-year hold, they compound.
The Exit Readiness Problem Hiding in Plain Sight
The EY Private Equity Exit Readiness Study identifies management and HR as the fourth most challenging area in preparing a portfolio company for sale. That ranking tends to surprise sponsors who have focused their pre-exit energy on financial engineering, ESG reporting, and commercial diligence preparation.
It should not surprise them. A prospective buyer conducting diligence on a business with a seven-year hold history will scrutinise the management team with particular attention. They want to understand whether the leadership is the asset or the liability. They will ask: who has been here since the start, why, and is that a sign of stability or of inertia? They will probe whether the current CEO can articulate the forward plan independently, or whether the narrative lives in the operating partner’s head.
This is a solvable problem. But it requires sponsors to treat leadership review as an ongoing operational discipline rather than an exit preparation activity.
What Good Practice Looks Like in an Extended Hold Environment
Sponsors managing assets through extended cycles are increasingly applying a structured mid-cycle leadership review at years two and four of ownership, independent of crisis or underperformance. The questions are deliberate: is the current team capable of delivering the revised thesis? Where are the gaps? What is the succession position for the two or three roles most critical to exit value?
In some cases, the answer is that the team needs reinforcement rather than replacement. An interim executive in a specific functional role, an executive chair brought in to provide strategic bandwidth, or a non-executive director with relevant sector or transaction experience can materially change the leadership picture without triggering the disruption of a CEO change.
In other cases, the review surfaces a misalignment that has been building quietly for eighteen months. The earlier that conversation happens, the better the outcome for all parties.
What is no longer viable is the assumption that the team assembled at entry will naturally evolve to meet whatever the business requires at exit. The hold period has changed. The leadership strategy needs to change with it.
The Practical Implication for Sponsors
The most effective operating partners in European PE are not waiting for leadership problems to announce themselves. They are building a continuous view of talent risk across their portfolio; not as a compliance exercise, but as a value creation tool.
For businesses currently in years three to five of an extended hold, the questions worth asking now are straightforward. Has the CEO’s mandate been formally refreshed to reflect the current thesis? Is the CFO able to lead a credible buyer-facing financial narrative? Are there one or two roles on the leadership team where a gap, if it opened today, would materially affect exit readiness?
Getting clear answers to those questions is not a distraction from value creation. It is value creation.
HMN Capital — Specialist Executive Search and Interim Management for Private Capital.
