M&A
A new analysis from PitchBook and PwC covering H1 2026 identifies a backlog of approximately 13,000 companies sitting unsold in private equity (PE) portfolios globally, reshaping how the industry measures success. The buildup — the result of compressed exit windows during 2022–2024 — is forcing general partners (GPs, the fund managers) to reconsider what a successful investment lifecycle looks like, with DPI (distributions to paid-in capital), the ratio of cash actually returned to investors, replacing IRR (internal rate of return, a time-weighted return metric) as the primary performance benchmark. The pressure is most acute for mid-market funds, where the secondary market for LP (limited partner, i.e. investor) stakes is increasingly absorbing positions that cannot be exited through trade sales or IPOs. Institutional investors surveyed in connection with the analysis are broadly staying committed to private credit alongside PE, but are applying greater selectivity to manager choice — a signal that fundraising for undifferentiated mid-market vehicles will grow harder through H2 2026. For London-advised transactions, the backlog has direct implications: M&A advisory pipelines at City firms depend heavily on sponsor-to-sponsor (secondary buyout) and sponsor-to-trade transactions as GPs seek exits. The volume and pace of those exits now depends less on valuation recovery and more on LP pressure for cash distributions — compressing timelines and creating motivated sellers across a range of sectors.
Why this matters
A 13,000-company overhang is structurally significant because it means sponsor clients are simultaneously under pressure to sell and struggling to find buyers at acceptable valuations. This creates demand for both M&A advisory work (structuring exits) and fund finance work (NAV facilities — loans secured against a fund's net asset value — to manufacture liquidity before a sale). The shift from IRR to DPI as the defining metric also changes the legal calculus: earn-out provisions, deferred consideration, and warranty and indemnity insurance structures that defer value realisation become less attractive to sellers who need cash now. City M&A and leveraged finance teams at firms with strong sponsor relationships are well-positioned, but the deal flow is contingent on valuation gaps closing.
On the Ground
On a PE exit mandate, a trainee would manage the CP (conditions precedent) checklist — the list of conditions that must be satisfied before completion — tracking regulatory clearances, board approvals, and financing conditions. They would also prepare and index the completion bible (the bound set of executed transaction documents delivered post-close) and assist with Companies House filings following share transfers.
Interview prep
Question you might get
“If a PE firm is under DPI pressure and needs to exit quickly, what deal structures might its lawyers recommend to bridge a valuation gap with a potential buyer?”
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A model answer you can lift into an interview — how to frame this story for a partner.
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