For years, IPOs were the go-to exit for private equity firms. Take a company public, cash out at a premium, and move on to the next deal. But that model is no longer delivering.

In 2022, private equity-backed IPOs accounted for just 3 percent of global listings, down from an average of 22 percent over the past decade, according to EY. That drop has forced firms to hold onto companies longer than planned, disrupting deal flow and return timelines.

Why IPOs Are Off the Table

Tougher market conditions are the core issue. Higher rates, tighter valuations, and investor pushback on leveraged balance sheets have all taken a toll. Many firms that pushed portfolio companies into public markets saw poor returns. Weak post-IPO performance has become common, especially for companies that thrived on cheap capital.

Investor appetite has changed. The post-pandemic IPO boom is over, and buyers are no longer paying premium multiples for private equity-backed deals. IPOs now price lower and close slower. The result is a shift away from public markets.

The New Exit Playbook

To manage liquidity, private equity is turning to strategic sales, secondary buyouts, and continuation funds.

Secondary buyouts have taken the lead. These are deals where one private equity firm sells a portfolio company to another. According to Bain & Company, secondary buyouts accounted for 42 percent of all private equity exits in 2024, the highest level in over a decade. These transactions keep assets within the private markets and avoid the volatility of public listings.

Continuation funds are also gaining traction. Instead of selling in a weak market, firms move assets into a new vehicle funded by fresh capital. This provides liquidity to early investors while allowing managers to hold onto strong assets. One recent example: JLL Partners secured $1.1 billion from TPG to continue backing Solvias, according to the Wall Street Journal.

Private credit markets are playing a role too. Some firms are using private credit to fund buyouts and distribute capital to investors, offering more flexibility than public markets.

The Market Looks Different Without PE

With fewer private equity exits hitting public exchanges, the IPO landscape is changing. Founder-led companies and growth-stage businesses are now more prominent in deal flow. These firms often go public to raise capital, not to provide an exit for sponsors.

Morgan Stanley expects IPO activity to pick up once interest rates settle, but private equity-backed listings may take longer to return in full force.

Meanwhile, the private equity industry is under pressure. Firms that cannot adapt are struggling to raise new capital. Some are considering mergers to stay competitive, according to The Times

Private equity is still a dominant force, but the model is evolving. The firms that figure out how to extract returns without relying on IPOs will keep leading the industry. The ones that don’t will face rising pressure to exit aging portfolio companies in a market that’s no longer interested.