Over the past 12 months, and in reality over the past two years, many private equity leaders have continued to expect a relatively swift return to “normal”. Rates would ease, exits would reopen, and elongated investment periods would unwind. That hasn’t happened, at least not at scale.

Instead, the past year has reinforced a broader structural shift across private equity portfolios. Extended investment periods are no longer an exception; they are increasingly the base case. McKinsey’s Global Private Markets Report 2025 highlights that holding periods across buyout funds remain well above pre-2020 norms, with GPs placing greater emphasis on operational value creation rather than timing-led exits.

That shift has profound implications, not just for portfolio strategy, but for leadership teams, incentive models and governance structures.

Through my work delivering interim leadership support for private equity funds and their portfolio companies, working with boards and supporting CFOs and finance teams across large-cap and high-growth investments, several themes have crystallised over the last 12 months, reflecting how firms are responding in practice.

Leadership pressure is rising and surfacing earlier

The most immediate impact of extended investment periods has been felt at the top of portfolio organisations. Leadership teams built for a shorter ownership cycle are now being asked to perform over a materially longer timeframe, often under tighter capital constraints and heightened scrutiny.

Mid-cycle CFO change, once the exception, has become more common. In parallel, tolerance for weaker finance capability has fallen sharply. With leverage more expensive and refinancing risk rising, cash control, forecasting quality and board-level financial storytelling have moved from hygiene factors to critical success variables. EY’s Private Equity Pulse 2025 reflects this shift clearly, noting increased investor intervention in finance functions earlier in the investment lifecycle.

From strategy to execution: Filling the capacity gap

At the same time, we have seen a quiet but significant rise in execution-focused leadership roles, including Chief of Staff, Chief Transformation Officer and senior PMO-led mandates sitting close to the CEO.

This reflects a recognition that value creation plans do not fail for lack of ambition, but for lack of execution capacity. In an environment where leadership teams are already stretched, these roles help prioritise initiatives and maintain momentum.

Governance has evolved in parallel. The resurgence of the Executive Chair role is a clear example. In many cases, it has become a pragmatic mechanism for addressing capability gaps or adding operating leverage late in an investment cycle without destabilising day-to-day leadership. The Ropes & Gray European Private Equity Market Review Q3 2025 highlights a broader increase in governance-led interventions as funds seek greater oversight and execution certainty across portfolios approaching exit.

Notably, Ropes & Gray also observes that assets held for longer periods are facing intensified diligence and governance scrutiny on exit. Buyers are spending more time assessing management depth, resilience and succession, rather than just headline performance. Leadership risk, increasingly, is exit risk.

Incentives, succession and the reality of extended ownership

Compensation models have had to respond. The traditional trade-off, lower cash today for a large equity upside tomorrow, has been materially weakened by extended investment periods and less predictable exit timing. CFOs, in particular, are now far more forensic in assessing equity value and downside protection. Recent Financial Times reporting on private equity dynamics highlights industry stress, extended holding periods and slow payouts alongside broader market shifts.

Succession planning has therefore moved from a “good governance” discussion to a commercial imperative. Buyers, lenders and minority investors increasingly look for credible depth beneath the C-suite. Where succession narratives are weak, risk is priced in, either explicitly or implicitly.

Looking ahead to 2026

As we look toward 2026, three outcomes feel increasingly inevitable.

First, leadership churn will continue. Extended investment periods, tighter capital structures and elevated performance expectations mean misalignment at the top will be addressed faster and more visibly.

Second, hybrid leadership models will become the norm. Interim, fractional and role-blended executives will play a central role in maintaining momentum and de-risking execution during longer, more complex ownership cycles.

Third, leadership strategy itself will continue to professionalise. The most successful funds are already treating talent decisions with the same discipline as capital allocation, investing earlier, measuring impact and intervening decisively.

A final thought for investors and management teams

If the last 12 months have demonstrated anything, it is that leadership is no longer a secondary driver of value. It is core to it.

For private equity investors, that means stress-testing leadership capability earlier and being realistic about incentives, support and execution capacity. For CEOs and CFOs, it means asking whether today’s leadership structure is genuinely designed for the next phase, not the last one.

And for those thinking seriously about exit, now is the time to act. As my colleague, Steve Clarke, Partner specialising in M&A, outlines in his recent blog ‘Positioning for a Successful PE Exit’, the foundations of a successful outcome are laid long before a process formally begins.

The firms best positioned through 2026 will not be those waiting for markets to improve, but those actively reshaping leadership capability to meet the market as it is.

Extended investment periods are changing how leadership, governance and execution are managed across private equity portfolios. If you’d like to continue the conversation, please do get in touch.

References:

• Global Private Markets Report 2025: Braced for shifting weather (McKinsey)
• Private Equity Pulse: key takeaways from Q3 2025 (EY)
• European Private Equity Market Recap – Q3 2025 (Ropes & Gray)
• Financial Times, Private Equity
• Positioning for a successful PE exit: Why exit readiness is becoming a priority