Imagine this…you have three very good offers (i.e., LOIs) to choose from, and every offer is similar in value. Let’s also assume that each buyer is backed by a private equity (PE) firm that will allow you to roll equity so as to receive a second bit of the apple. How do you then choose between offers? What questions do you need to ask to help make that decision? While all offers may appear similar on the surface, understanding the plans and expectations of the PE firm can make a big difference in the overall value of your transaction in the end.
If you’re the founder of a Managed Services Provider (MSP) or Value-Added Reseller (VAR) and you’ve been approached by a PE firm (or one of their portfolio companies), chances are the conversation quickly turned to valuation, deal structure, and growth strategy. And while all of that is important, there’s a crucial topic that often goes overlooked until it’s too late:
How long will the private equity firm actually hold your company?
This is not just a technical detail. A PE firm’s hold period has real implications for your role post-sale, your second bite of the apple, your team’s experience under new ownership, and the overall trajectory of the business you’ve spent years building. Understanding that timeline can help you avoid surprises, negotiate smarter, and decide if the deal on the table truly aligns with your goals.
What the Data Says About PE Hold Periods
Let’s start with the numbers. According to research and market intelligence firm Martin Wolf, the average private equity hold period for MSPs is around 4.9 years. That’s shorter than the broader PE market, where hold periods have climbed steadily over the last decade. For example, PitchBook reports that median hold periods across all industries reached 5.7 to 5.8 years in 2024–2025, while S&P Global pegged the average at 7.1 years in 2023 – the highest since they began tracking that data.
The difference is telling. PE firms tend to view MSPs and other recurring revenue tech service businesses as highly efficient platforms for value creation. These companies typically offer sticky customer relationships, predictable cash flow, and lots of opportunity for geographic or vertical expansion. In other words, they’re often bought with the express intention of scaling quickly through both organic growth and bolt-on acquisitions, and then being sold within five to six years.
But hold periods are stretching in certain cases. Economic headwinds – such as rising interest rates, tightened credit markets, and an uneven M&A environment – have made it harder for PE firms to exit at their preferred timelines. That’s led to what PitchBook calls a “maturity wall.” Thousands of PE funds raised between 2015 and 2019 are now entering their harvesting stage, or the final few years of a fund’s lifecycle when it becomes critical to liquidate holdings and return capital to investors. In fact, more than 50% of all active PE funds today are at least six years old, and over 1,600 funds are expected to reach the end of their 10-year term between 2025 and 2026.
What does that mean for founders? If you’re approached by a buyer backed by one of those aging funds, you may be stepping into a business that’s already on the clock. That’s not necessarily a dealbreaker, but it does mean the buyer might be more focused on near-term outcomes than long-term value creation.
Why It Matters to You as a Seller
When a PE firm buys your business, they’re making a bet that they can increase its value and exit at a higher multiple within a defined window – typically five to seven years. That clock starts ticking the day they make the investment. If your company is being acquired as a platform (meaning it will serve as the foundation for additional acquisitions and broader growth), you’re likely to be part of a longer-term plan, especially if the fund is still in its early years. In that case, you may have time to integrate new companies, build out leadership, and see your rollover equity appreciate ahead of a future sale.
But if you’re being acquired as an add-on (especially if the fund is already in year four, five, or six), you may be coming into a much shorter runway. Your company could be rolled up quickly and prepped for exit in just 18 to 24 months. That can impact everything from how much say you have in the direction of the business to how much value you’re able to realize through earn-outs or retained equity. But it also means you can get your second bite much quicker. Which may be a very important consideration if your goal is to not stay on for more than a couple of years post-acquisition.
It’s also worth noting that some firms nearing the end of their fund term may be more focused on hitting return targets than building long-term value. That can affect culture, capital allocation, and decision-making in ways you may not expect. It may also mean that not everyone in your company, especially shareholders, will have a seat on the bus or any seat at all long-term.
The Questions You Should Be Asking
As a founder, you’re not just selling your company – you’re entering into a multi-year relationship. That’s why it’s essential to ask prospective buyers about their fund structure and timing. A few key questions to bring up include:
- What year was your fund raised?
- How much time remains in the fund’s lifecycle?
- How long have you owned the platform company, and when do you anticipate exiting it?
- Have you requested or secured any extensions?
These questions can help you gauge whether you’re stepping into a short-term sprint or a longer-term build. And then once you understand that, the most important question is:
- What will my investment potentially yield and what multiple are you assuming to calculate that?
After all, this is why you are rolling equity.
These answers can also influence how you structure the deal. For instance, if the buyer’s timeline is tight, you may want to push for shorter earn-out periods, allocate less toward equity, and possibly more cash at close (since the cost of the stock may be higher and the return on your investment could be lower). If the fund is early in its life, you might negotiate for longer-term alignment, such as participation in future M&A roles and more equity upside for key managers on your team (like management incentive units).
Knowing which offer is best for you is somewhat dependent on how long you want to stay and if you can maintain your equity should you decide to leave before a recapitalization event. My older clients tend to look for shorter returns on their investments, meaning PE firms who will recapitalize in the next couple of years, if not sooner. My younger clients are more interested in making an impact in their new roles and are looking to get in early so that they can increase their equity investment.
Final Thoughts: Aligning Expectations with Exit Timelines
Private equity can be a tremendous partner for MSPs and VARs, bringing capital, operational rigor, and strategic resources to accelerate growth. But one of the most important pieces of the puzzle is often overlooked: timing.
The average PE hold for MSPs hovers around 4.9 years. That’s a useful context, but every firm – and every fund – is different. Some hold longer, others look for quick flips, and many are influenced not by your performance, but by their own internal fund deadlines or broader market conditions.
That’s why understanding a buyer’s timeline is just as critical as understanding their offer. Ask when the platform is likely to recapitalize. Ask how long the current fund has left before it needs to return capital. These aren’t minor details – they directly impact your future role, the value of your rollover equity, and your ability to participate in a second bite of the apple.
The right deal for you depends on your goals. If you’re closer to retirement or prefer a shorter runway, a PE firm nearing the end of its hold period may actually be a better fit. On the other hand, if you’re earlier in your career and excited to build something bigger, you may want a buyer with several years of growth ahead and the opportunity to help shape that journey.
In the end, choosing the right buyer isn’t just about price…it’s about alignment. When the timeline, structure, and expectations all match your vision, that’s when you get a deal that truly delivers long-term value.
If you’re weighing offers and want help evaluating what’s behind them (beyond just the headline number), I’d be happy to help. I’ve guided dozens of VAR and MSP owners through successful exits, and I can help you assess your options with clarity and confidence.
What to Ask Your CPA Before Going to Market (Hint: It’s More Than Just Tax Returns)