🔒   Private Equity’s Exit Problem
🔧   Hands-On Leaders
đź’¸ Â Â Net Working Capital
🔒 Private Equity’s Exit Problem
Private equity (PE) has a problem: It can’t sell its portfolio companies.
In 2021, debt was cheap and the deals were flowing. Now, the industry is constipated.
According to Bain’s 2026 Global Private Equity Report, PE is sitting on 32,000 unsold companies worth $3.8 trillion. The average holding period at exit is seven years, up from five to six years from 2010 to 2021.
Rising interest rates are the primary reason for the exit problem. It changed the math. In 2015, 5% annual EBITDA growth delivered a 2.5x multiple on invested capital. In 2026, it requires 12% to deliver the same return.
This is a good lesson for all businesses: Slow to flat growth is not an option. As Bain puts it, “12% is the new 5%.”
Growing a business at 10% to 15% annually is achievable and sustainable:
- Position to Win: Identify and validate a growth market you can own.
- 3X Growth: Build the systems, team, and infrastructure of the next level to get to the next level.
- Strategy Execution: Implement 90 day Slingshots with weekly strategy huddles to drive accountability and performance at all levels of the organization.
🔧 Hands-On Leaders
There’s a belief in business that the CEO sets the strategy and vision and delegates the day-to-day operations. But that’s rarely the case.
The best companies are the best executors, and it’s baked into the structure of the business. The CEO creates the systems and culture that help everyone excel at getting work done.
In CoStrategy we refer to these leaders as “Operators.” They are hands-on leaders.
Operators steer the business from within. This doesn’t mean they insert themselves in every decision, or displace the authority of their managers and teams. Rather, they operate the business as teachers, systems builders, and problem solvers.
Hands-on leaders have two advantages:
- ‍Intuitive Market Awareness. Operators are connected to their customers, often on a first name basis. And when the market moves, they’re the first to know.
- ‍Rapid Mobilization. Operators actively move their organization to capitalize on opportunities or overcome threats. They use their leadership and influence to shape the business structure, emphasizing execution at all levels.
Business books and consultants will say Operators are a problem, but some of the most successful CEOs are hands-on leaders. What makes them effective is how they evolve and grow with the business.
A tenet of CoStrategy: The ability for a business to grow is dependent on the ability of the entrepreneur to change.
But don’t delegate or take an ivory tower seat to your business. Stay in it. Lead it. Grow it.
đź“ŠÂ One Stat to Watch
44%
of consumers feel more anxious than they did last week, according to Deloitte ConsumerSignals. Anxiety is driven by their personal financial situation (42%), direction of the economy (32%), and political uncertainty (28%).
💸 Net Working Capital
In uncertainty, cash is king. The question is, how much cash do you need?
Net working capital is a measure of financial health. It is the amount of money a company has available to operate after deducting its current liabilities from its current assets.
The calculation helps guide three questions:
- How many weeks of operating expenses can you cover with liquid reserves if revenue slows?
- Are you funding operations with working capital or debt and deferred payments?
- Which parts of your business are generating cash, and which are consuming it?
Set net working capital targets that are reasonable for your business and its operating requirements, and then set plans to improve them annually.
This can be achieved through improving accounts receivable, procurement, and inventory management. Incremental improvements to liquidity improve the overall health of your business and provide a lifeline in turbulent times.
🤔 Thoughts on Today’s Issue?
We’d love to hear your feedback. Message with any thoughts, comments, or ideas for future issues.
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