If you’ve been following the headlines, you’d think private equity is underperforming. The reality, however, is more nuanced — and far more interesting.

At its core, private equity follows a straightforward model:
buy, professionalize, sell, return capital, and repeat.

Right now, the challenge isn’t with that strategy itself.

The issue is that the “sell” step has become increasingly constrained.

Higher interest rates have made financing more expensive. IPO markets have slowed. Strategic buyers are approaching opportunities with greater selectivity. As a result, even strong businesses are being held for longer periods. Capital is not being returned to investors as quickly, and reported returns are being compressed in the short term.

This dynamic is what we’re seeing reflected in pension fund results. It is less about value destruction and more about delayed liquidity.

In other words, the system isn’t broken — but it is slower, and more disciplined.

What This Means for Business Owners

For business owners in the lower middle market, this shift has clear implications:

Planning is no longer optional — it’s essential.

In today’s environment, buyers are more selective. Diligence processes are deeper. Valuations are increasingly sensitive to risk, deal structure, and timing.

The days of simply “taking a business to market and seeing what happens” are fading.

Instead, the businesses that will achieve strong outcomes over the next three to five years are those that:

• Prepare well in advance
• Understand their buyer universe
• Clearly position their story
• Build optionality before entering a process

A Shift Toward Early Preparation

At Portage, we’re seeing this shift firsthand.

More conversations are happening earlier — often years before a transaction — with a focus on readiness, positioning, and long-term value creation.

Not because owners are looking to sell today,
but because they want to be ready when the timing is right.

A Market Reset — Not a Downturn

This is not a downturn.

It’s a reset toward discipline.

And for those who begin preparing early, it may represent one of the most compelling environments we’ve seen in years.

If you’re thinking about what a potential exit could look like — even if it’s still a few years out — I’m always happy to share what we’re seeing.

Jim Friesen, MBA, CPA, CM&AA
Founder