PE Firms Going Back to the Drawing Board on Deals They Already Own
Private equity sponsors are fundamentally changing how they manage portfolio companies during extended holding periods, increasingly abandoning the assumption that an initial investment thesis remains fixed through exit.
According to new research from McKinsey & Company titled Unlocking Full Potential: Five Practices Reshaping PE Value Creation, buyouts are experiencing prolonged lifespans. Average hold periods have stretched past six-and-a-half years, and buyout distributions plummeted to just 6% of assets under management in 2025, down from a 16% average between 2015 and 2019. In response, sponsors are adopting “re-underwriting”—a discipline where firms periodically reassess market dynamics, competitive positioning, and operational priorities as if “mentally repurchasing” the asset.
The strategic shift has yielded clear performance advantages. One surveyed sponsor attributed a capital distribution equal to 30% of total fund value over the past two years to structured re-underwriting, while a European sponsor accelerated its exit timelines by 40% after implementing future-buyer readiness reviews.
To execute these rigorous assessments, private equity firms have more than doubled the size of their internal operating groups since 2021. This operational scaling is visible across the industry; in a McKinsey survey of 27 private equity executives, over 80% reported that at least one portfolio company was undergoing an active transformation initiative.
The research also documents a broader operational buildup. Since 2021, private equity firms have more than doubled the size of their operating groups on average, with more than 80% of surveyed executives reporting at least one portfolio company undergoing a transformation initiative.
AI is beginning to accelerate re-underwriting itself — compressing reviews that previously took weeks into days by rapidly analyzing operational data and drawing on insights from prior transformations. McKinsey notes AI has also improved operations within portfolio companies, reducing content production costs by roughly 40% and customer care costs by about 15%.
