Exit readiness is now a year-round discipline for portfolio companies

Operators and investors,

Private equity funds are holding portfolio companies longer than their fund models planned for. More than 63% of active portcos have been held past four years (per With Intelligence), the market-wide backlog stands at roughly 32,000 unsold companies worth $3.8 trillion, and the average hold is now close to 7 years against the 5-6 years the last decade ran on.

Exit activity is recovering, but not for everyone in the backlog. Announced deal value reached more than $900 billion over the trailing twelve months, up 34% (EY), and 2025 was the first year since 2021 in which exit volume grew by double digits. Over the same period, exits of $50M to $250M companies fell by roughly a quarter. The recovery is reaching large, well-documented assets first and leaving most of the mid-market in the backlog.

The reason is how buyers now transact. Most mid-market exits start with a direct approach to one company rather than a banker-run auction, and the buyer reviews financials, customer data, and working capital before committing to a price (Ropes & Gray's May 2026 recap notes a similar concentration in selective, pre-qualified processes).

A company that needs two quarters to produce that documentation does not always get two quarters. The buyer moves to the next target on its list.

This issue covers four things:

• Why exit readiness has to be year-round now

• The disciplines that keep a portco sell-side ready in normal operations

• How to embed the diligence file into the existing cadence

• The ownership model that sustains it

If you run $50M to $250M EV companies, this is the playbook for your operating partner and portco CFO.

1. Why exit readiness has to be year-round now

In 2026, the buyer decides when the exit process starts. Sponsors who plan a sale for year five typically find the actual opening arrives earlier or later than that, as a direct approach from one buyer rather than a process the sponsor launches. The buyer reviews the numbers before agreeing on a price.

There are 3 factors behind this:

• More companies for sale than buyers willing to underwrite them: the 2020-21 vintages are reaching their five-year marks now, which adds exits in 2026 while buyers stay selective, so each buyer can pass on an unprepared company and pick a prepared one instead (ECI Partners reaches the same read)

• Buyers re-trade on gaps: the re-trade, where a buyer turns a diligence finding into a reason to cut the agreed price, has become the standard mechanism for repricing mid-market deals after LOI, a pattern Walden M&A sees repeatedly

• Continuation vehicles only delay the choice: sponsors keep moving their strongest companies into single-asset vehicles, but Q1 volumes show this route is absorbing fewer companies than the exit backlog adds (per Ropes & Gray)

All three reward the same thing: a company whose financials, customer data, and working capital documentation can be handed to a buyer within days of an approach. A company that cannot do this misses the approach entirely or takes the re-trade.

2. What always-on readiness looks like in a $100M to $250M portco

📝 The CFO produces the diligence file, but the inputs come from sales, marketing, customer success, and operations. Only the CEO can require those functions to deliver their data on the close calendar. Without that mandate, inputs arrive late and the file goes stale between deals.

The failure point at exit is rarely the headline EBITDA number. When a buyer's team cannot trace a metric to its source system, every number on the cover page becomes negotiable.

Nearly 72% of PE firms name weak data and KPI reporting as their biggest finance issue at exit, and the firms that exit well treat three things as priorities: value creation captured in EBITDA, data readiness and granularity, and management preparation (per EY's Private Equity Exit Readiness Study 2025). Buyers now expect GAAP-compliant monthly financials going back at least twelve months, and building the close process that produces them takes several quarters.

Five disciplines do most of the work:

• Monthly QoE-grade financials: GAAP-compliant monthly statements, with revenue recognition, cut-offs, accruals, and add-back rationale documented as part of each close

• Customer concentration as a board KPI: track top-10 revenue exposure monthly and trigger a diversification plan when it crosses the threshold the board sets, because concentration is the first number buyers use to argue the price down

• Working capital baseline documented quarterly: a documented baseline narrows the range a buyer can claim for the peg at LOI

• CRM-instrumented revenue quality: ARR, NRR, gross retention, and cohort churn pulled from system data, so none of it has to be rebuilt when a buyer asks

• Data room run as a close: a monthly refresh owned by the CFO against a checklist, which replaces the six-month assembly project before going to market

3. Build the diligence file into the operating cadence

Most portcos run exit prep as a separate project that starts when the banker is hired. By then, the team is rebuilding documentation that should already exist, and every rebuild hands the buyer a re-trade.

A clean monthly close means a buyer's accountants confirm the numbers rather than reconstruct them. A reconciled customer file means a concentration question gets answered in a day. A documented working capital baseline means the peg discussion starts from the company's number rather than the buyer's estimate. The reverse also holds: slow answers signal weak controls, and weak controls invite deeper diligence, which surfaces more findings to re-trade on.

Embed these into the close cadence rather than adding parallel processes:

• One source of truth for customers: a single account hierarchy, segment set, and churn definition used by CRM, billing, and finance, so the three systems produce the same customer numbers

• Continuous add-back log: every one-time or non-recurring expense documented in the month it hits the GL, while the context still exists

• Monthly cohort and retention in the board pack: NRR, GRR, and logo retention published every month, so twelve months of buyer-ready retention data exist at any point

• Pre-built data room shell: structured folders with named owners and refresh dates, so going to market means granting access rather than assembling documents

4. Assign owners and run a fixed rhythm

Readiness without named ownership decays between deals. Management teams put the operating plan ahead of a file for a buyer who has not arrived, which is rational until the buyer arrives. The operating partner enforces the rhythm, inside the existing meeting cadence rather than as additional meetings.

Three layers of ownership:

• Monthly, CFO-owned: data room refresh, KPI close, add-back log, customer concentration review, all handled in the existing close meeting

• Quarterly, CEO and operating partner: cohort review, GTM scalability audit, rolling 12-month mock QoE, working capital review, retention against plan

• Annual, sponsor-owned: a third-party sell-side diligence pre-empt, the value creation plan stress-tested against who is actually buying in the sector, and a refreshed readiness scorecard to the board

• Always-on: every red scorecard item enters the next 90-day plan with a named owner and a date

When the diligence file is produced as part of the monthly close, it stays current, and a buyer who approaches can start diligence within days instead of waiting for the file to be assembled.

This week, run a 90-minute readiness audit with the portco CFO, CEO, and operating partner. Three questions to focus on:

1. If a credible inbound landed today, what three items would a buyer ask for that we cannot produce in 48 hours?

2. Which of our top 10 customers have we lost leverage with in the last 12 months, and how does it show in the cohort data?

3. Where is the gap between what we report to the board and what a sell-side advisor would require?

Score each company red, yellow, or green per dimension. Every red item moves into the next 90-day plan with an owner and a date.

Mario

🦾 AI agents now beat 95% of marketers on outreach, and bots manage 100+ partners while CSMs stay capped at 5 clients. Jason Lemkin demoed his bot net at SaaStr AI, and my own setup runs more advanced. Not running custom agents on your data in 2026 is stone age - the gap between operators who built and those who waited is now visible.

🎯 PE firms keep hiring Big 4 + MBA combos for portfolio leadership, and I watch them spend 6 months figuring out how to actually run something. Consulting trains you to deliver projects; operators own numbers. Ask candidates: tell me about a number you owned and missed - what did you cut? If they can't answer in 60 seconds, they're not ready for portco leadership.

📚 A teacher won one of the 3 copies I gave away at Sofia Marketing Meetups last night, then asked for an autograph. MBA Disrupted was 5 years in the making, shipped in April 2024, and still holds today. 12 digital business models, 6 GTM motions, and 400+ pages of operator frameworks - the kind of playbook that earns shelf space for years.

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Prompt injection has officially become an enterprise security category, not just a research curiosity. OpenAI launched Lockdown Mode for ChatGPT Business to harden against data exfiltration risks, acknowledging that even its own product remains partially vulnerable in normal mode.

Cybersecurity incidents are now producing material financial disclosures and operational standstills across the mid-market and beyond. Stryker took a Q1 earnings hit from an Iranian device wipe, Hasbro delayed its SEC filing after weeks of downtime, and supply chain attacks on Bitwarden and Trivy cascaded into breaches at OpenAI and Vercel.

+1 here - ADDAI is repricing software, and PE buyers are stepping back until valuation models catch up. Bain analysis cited by Bloomberg shows PE tech deal activity has dropped sharply as sponsors struggle to underwrite SaaS business models facing AI disruption.

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Working with me

🌐 Scaling $30M - $100M+ mid-market companies with value creation through RevOps, data engineering, and WordPress. DevriX provides full RevOps consulting + delivery with GTM enablement for PE-backed portfolio companies, traditional tech, healthcare, finance, and professional service businesses pacing toward revenue growth initiatives. Our standard retainers between $10K and $60K include revenue lifecycle services for marketing and sales leaders, FP&A for financial teams, pipeline enrichment through websites and dozens of lead sources, automations and delivery integrations, CRO and ongoing testing, product delivery and platform integration solutions, and more through our consulting solutions.

🚀 1:1 Advisory retainers. At Growth Shuttle, I run two popular plans: Async Advisory ($3,500/mo) for $3M - $30M founders and executive teams and the smaller Strategic Growth Circle ($997/mo) for $100K - $500K entrepreneurs, agency founders, scale ups. My fractional executive plan is also available here.

📈 Building US LLCs from Europe. I help European and Asian founders scale faster through doola and their “Business in a Box” model. Also suitable for US citizens (given their bookkeeping solution), but in very high demand across Europe.

📊 Post-Merger Integration. We take on M&A initiatives with Flippa. Working closely on PMI retainers for PE companies and fast-growing startups integrating new companies within their portfolios, enabling data pipelines, and securing more deals through my personal network.