The Price Still Isn’t Right

It’s been a waiting game in an industry not known for its patience. Unable to find the right price to invest in some 30,000 companies, private-equity firms have been holding onto much of their so-called “dry powder” for several years. But it’s all starting to add up, with the sector now swimming in some $2.5 trillion in capital, and experts are wondering how long the situation can last. The overriding concern: Nobody wants to be the buyer who overpays.

“People have become more cautious,” says Francois Auzerais, head of Korn Ferry’s Private Markets practice in North America. Adds David Wise, the company’s vice chairman of rewards: “It’s a volcano that at some point will have to erupt.”

The problem is structural more than anything, experts say. After the explosive exit environment of 2020 and 2021, investors poured gains back into new funds, expecting similar returns. At the same time, the largest private-equity firms discovered they could raise massive pools of capital through the insurance industry. "You've got the same deal teams trying to deploy five times as much capital into a world where the same return profile doesn't exist," says Chad Astmann, co-head of Korn Ferry’s Global Investment Management practice.

To be sure, some private-equity firms, under pressure from investors looking for returns, started selling off assets about two years ago. But experts say the smartest firms aren't panicking. Instead, they're fundamentally rethinking what it means to create value in private equity, transforming an industry that once prided itself on quick profit-making into one that’s increasingly interested in long-term business building. To help you play a longer game—and get the right price—Korn Ferry’s experts share three tips.

Use the secondary market.

As firms sit on mounting amounts of capital, a new secondary market is allowing them to strategically sell stakes in overall PE funds to new investors, often at a discount. And many PE shops are using this tool: In the first half of 2025, secondary-market transaction volume reached $103 billion, a 51% increase from $68 billion in the first half of 2024.

Secondary markets give liquidity to PE firms, as well as capital assets to new investors at a discount that may provide faster returns. And while it doesn’t solve the dry-powder problem per se, it does create a new ecosystem of assets. In cases of distressed investing, the secondary market “allows PE firms the opportunity to exchange debt for control,” Auzerais says.

Embrace more evergreen fund structures.

For a long time the PE playbook was straightforward: Buy a business with good bones but poor management, install turnaround specialists, and sell at a tidy profit in a handful of years. But what used to be a three- to five-year flip has become an eight- to ten-year hold, meaning that what once would’ve been considered a failure—not exiting within the usual target window—is now becoming standard practice.

The result: Firms are changing their investment ethos, looking to buy good companies with good leadership teams and to optimize them over 10 years. “You can grow value through longer-term practices like investing in people and culture—all the stuff that publicly traded companies typically do,” Astmann says.

Go deeper on interventions.

With time to invest, PE firms are developing leaders, looking at talent gaps, and analyzing how to make sales teams more effective. Some shops have opened up entirely new functions, building internal groups dedicated to improving portfolio performance.

What’s more, traditional PE operating partners have evolved: Yesterday’s occasional board advisors have become today’s full-time value creators. This is particularly advantageous for mid-market firms that likely haven’t had access to pipeline-development opportunities. “If you're a mid-sized trucking company in Idaho, you can now leverage resources that didn't exist a decade ago," Astmann says.

The firms that thrive in the current dry-powder era will do so because of their strategy, not their speed. “This isn’t a market of Wall Street wizards, but one of value creators,” Astmann says.

Learn more about how Korn Ferry helps private equity firms create value.