Hold Periods and Exit Timing
06d lays out the operating model, 06e works the return math, and 06g follows SailPoint through one complete hold. This section covers how long a sponsor holds a cyber asset and how it exits. Hold length and exit route set the IRR (time is the denominator) and determine whether a portfolio company spends a given year buying or being positioned for sale.
When Thoma Bravo took SailPoint private in Aug 2022 and re-listed it in Feb 2025 (06g), the ~30-month round-trip was fast relative to a baseline that had stretched considerably. The median holding period for PE-backed companies hit 6.0 years — the longest on record — with the 2025 global average around 6.6 years (S&P Global, McKinsey). More than half (~52%) of buyout-backed companies have now been held four years or longer, and the global backlog of aging assets swelled to roughly 16,000 companies (McKinsey). SailPoint exited quickly because it was ready; much of the portfolio is not.
Why hold periods stretched
A sponsor's return is a function of three things: how much EBITDA and multiple it adds, how much leverage it used, and how fast it gets the money back. IRR is exquisitely sensitive to time: the same 3× MOIC is a ~32% IRR over four years and only a ~20% IRR over six. So when exit markets freeze, every extra year of hold silently bleeds IRR even if the asset performs.
That is exactly what happened across 2022–2025. The IPO window narrowed, strategic buyers turned cautious, and sponsor-to-sponsor deals got harder to finance at the leverage levels of 2021. Hold periods drifted up from ~4.3 years in 2017 to ~5.4 years in 2024 before the first tentative decline in 2025 as exit conditions began to thaw (privateequityinfo, S&P Global).
Cyber sits on both sides of this. On one hand, scaled cyber assets are exactly what can exit — durable, compliance-driven recurring revenue is the rare thing a frozen market will still underwrite, so the best cyber platforms (SailPoint, the eventual Proofpoint/KnowBe4 exits) move ahead of the queue. On the other hand, the 2026 software valuation reset — public software indices down ~30% with roughly $1.6T of market value erased in early 2026 (CAIA) — re-priced the exit math mid-flight, pushing some sponsors to hold and keep consolidating rather than sell into a soft tape.
The four exit routes
There are now four ways a sponsor realizes a cyber asset, not three. Each implies a different relationship to the M&A advisory market:
| Exit route | What it is | When it's chosen | Demand it creates |
|---|---|---|---|
| Strategic sale (M&A) | Sell to a corporate acquirer (PANW, Cisco, MSFT, a larger platform) | Asset is a strategic fit / fills a capability gap; highest multiple when there's a bidding war | One-time buy-side mandate for the acquirer |
| Secondary buyout (sponsor-to-sponsor) | Sell to another PE firm | Asset still has a value-creation runway but this fund needs liquidity; very common in cyber | A new sponsor begins a fresh buy-and-build → serial-acquirer demand |
| IPO / re-IPO | Float on public markets, usually retaining a controlling stake | Asset is scaled (~$500M+ ARR) and the IPO window is open; SailPoint's route | A re-listed, sponsor-controlled platform with public currency to consolidate |
| Continuation vehicle (CV) | GP sells the asset to a new fund it also manages, with LPs choosing to cash out or roll | Great asset, fund life expiring, no good third-party exit — keep compounding | The asset stays a buyer; the sponsor stays in the chair |
The continuation vehicle has gone from a workaround to a structural feature. The secondaries market hit a record ~$226B in 2025 (+41% YoY), and GP-led / continuation-fund volume grew nearly 70% YoY; by Q3 2025, ~16% of all sponsor exit volume ran through GP-led secondaries — cementing the CV as a recognized fourth exit route alongside M&A, IPO, and secondary buyout (William Blair, White & Case). Vista's ~$5.6B continuation vehicle for Cloud Software Group in 2025 was the marquee software CV and a direct read-through for cyber (Akin).
The exit-timing clock
Inside a single hold, a cyber platform moves through predictable phases, and each phase indicates whether the company is a buyer or a seller that year:
- Years 0–1 (entry / stabilize). Integration, management changes, the model-transition decision (06d). Rarely acquisitive.
- Years 2–5 (the buy window). The platform is consolidating — funding bolt-ons, levering up to buy, compounding EBITDA (06e). This maps to the buy-side prospect criteria: year 2–5 of hold, consolidating sub-segment (Buy-Side Prospect Framework).
- Years 5–7 (the prep / exit window). Acquisitions slow, the story gets polished, advisors are hired, and the asset is positioned for one of the four routes. A platform that goes quiet on M&A and starts adding public-company-grade finance and IR talent is signaling that an exit is being staged.
- Beyond year 7 (the overhang). If no exit cleared, the asset is a CV candidate — or it sells into the next open window. The 2025–26 backlog means an unusually large cohort of cyber assets sits here, primed to either transact or be re-armed via a CV.
The practical asymmetry: the buy window (years 2–5) lasts longer than the exit window, and the recent stretch in hold periods has lengthened the buy window further — more years in which a sponsor-backed platform is an active acquirer needing deal flow.
The falsifiable bear case
The optimistic read — "longer holds mean a bigger, longer buy window, so more buy-side mandates" — breaks if the exit freeze becomes an originating freeze. When a sponsor can't see a path to exit, it sometimes stops buying too: it conserves dry powder, defers bolt-ons, and waits. In that world the backlog is dead weight, not a pipeline, and platforms in years 5–7 sit paralyzed rather than consolidating or selling. The CV boom is the tell to watch: bulls call continuation vehicles a sign the machine keeps running; bears call them a liquidity patch that lets GPs avoid marking assets to a lower market and defers a reckoning (CAIA). The case flips if 2026's expected exit broadening stalls and CV volume keeps climbing as a substitute for real exits rather than a complement — that would mean the assets aren't clearing, and the buy window is frozen, not extended.
→ Cross-references: Private Equity, Operating Model & Mechanics, Buy-and-Build Math, Worked Case Studies, Value-Creation Case: SailPoint, Buy-Side Prospect Framework, Deal Structures & Exits, M&A Deals & Comps, Key People.
Updated 2026-08-16 18:13 UTC · © El Dorado Capital · el-doradocapital.com · Market intelligence for informational purposes only; not investment advice.