The Coming Wave of PE Divestitures: How Funds Are Positioning Assets to Return Capital to LPs
For founders and investors in the tech ecosystem, 2026 is shaping up to be a pivotal year in sponsor-backed M&A. After several years of muted exits, a significant cohort of private equity-owned technology companies is approaching the natural end of its hold period, at the same time that a backlog of unrealized exits is still working its way through the system.
From our vantage point as Canada’s most active tech M&A advisor the setup is clear: a wave of PE divestitures is building. Understanding why requires revisiting the traditional PE hold model and how the 2020–2022 deal cycle is now intersecting with today’s exit environment.
The PE Hold Model in Tech: Platform + Add-Ons + Operational Rigor
Most private equity investments are underwritten to a 3–7 year hold, with five years often serving as the base case. In technology, that value creation plan typically rests on three pillars:
1) Organic Growth Acceleration
Sponsors invest heavily in go-to-market infrastructure, pricing strategy, customer success, and KPI discipline. In software, that often means driving net revenue retention, improving CAC efficiency, sharpening ICP focus, and building predictable ARR growth. Product roadmap clarity and upsell/cross-sell motions are central.
2) Add-On Acquisitions
In the middle and lower middle market, buy-and-build strategies are especially prevalent. A strong platform acquires complementary products, new vertical capabilities, geographic expansion, or customer segments. In software, add-ons can quickly expand TAM and create meaningful cross-sell synergies, provided integration is executed thoughtfully.
3) Margin and Cash Flow Expansion
Beyond top-line growth, sponsors focus on gross margin optimization, vendor rationalization, cloud cost management, pricing discipline, and organizational design. The goal is not just to grow revenue, but to improve the quality and predictability of earnings.
When this playbook works, the result is a scaled, more diversified, more durable business positioned for a premium exit multiple. But that outcome depends heavily on timing.
The 2020–2022 Acquisition Surge Is Maturing
Deal activity surged in 2020–2022. Low interest rates, abundant capital, and strong public software valuations supported aggressive underwriting across the ecosystem. Many funds deployed capital rapidly, backing high-growth platforms and executing add-on strategies at pace.
Fast forward to today: those investments are now approaching the latter half of their expected hold periods. A 2021 acquisition underwritten to a five-year plan naturally points toward 2026 as a target exit window.
At the same time, 2025 proved lighter than many sponsors anticipated in terms of realizations. Valuation resets, financing constraints, and buyer selectivity delayed some exits that might otherwise have cleared. That creates what we view as a double cohort dynamic:
Assets acquired during the 2020–2022 surge now reaching maturity
Assets that were ready (or nearly ready) to exit in 2025 but were held longer
For founders and investors, this matters because it increases supply. More sponsor-backed tech assets are likely to come to market over a relatively concentrated period. That competition heightens the importance of positioning and preparation.
How Sponsors Are Preparing Tech Assets for Exit
In a crowded market, quality wins, but only if it’s visible and defensible. We are seeing sponsors focus on several key areas ahead of a sale process:
Durability of Revenue
Buyers are scrutinizing retention, cohort performance, churn drivers, and customer concentration more than ever. Clean ARR bridges, clear segmentation, and transparent pipeline visibility are table stakes.
Integrated Buy-and-Build Narratives
For platforms that executed add-ons, the exit story must show real integration—not just financial aggregation. Unified product architecture, consolidated sales motions, harmonized pricing, and measurable cross-sell success materially strengthen credibility.
Operational Readiness
Disciplined financial reporting, consistent KPI definitions, GAAP rigor where applicable, and clean data rooms accelerate processes and reduce execution risk.
Balanced Growth and Efficiency
The market no longer rewards growth at any cost. Sponsors are increasingly presenting businesses that demonstrate both expansion and capital efficiency, an important shift from the 2021 mindset.
For founder-led companies evaluating capital or exit options, this evolution signals what future buyers, financial and strategic, will expect.
Alternative Liquidity Pathways Are Here to Stay
Not every asset will exit through a traditional full-control sale. As funds work to return capital to LPs, alternative structures are playing a larger role:
Continuation Funds (GP-Led Secondaries)
High-quality tech assets with continued runway are increasingly being rolled into continuation vehicles. This allows sponsors to provide liquidity to existing LPs while retaining exposure to future upside. For founders and management teams, this can mean a “second chapter” with a refreshed capital structure rather than an outright sale.
Minority Secondary Transactions
Partial liquidity solutions, whether for sponsors, co-investors, or management, are becoming more common. These structures can de-risk positions and generate distributions without changing control.
IPO Markets: Selective and Scale-Dependent
IPOs remain a selective path, particularly for middle and lower middle market software companies where scale, liquidity, and coverage thresholds are high. For many sponsor-backed businesses, sponsor-to-sponsor transactions, strategic acquisitions, or structured liquidity solutions remain more practical and predictable routes.
What This Means for Founders and Investors
For technology founders, the coming divestiture wave creates both opportunity and competition. Strategic acquirers and private equity buyers will have a broader menu of sponsor-backed assets to evaluate. Businesses that present clear differentiation, strong retention economics, and defensible growth will stand out.
For investors, particularly those holding minority stakes alongside sponsors, understanding the broader liquidity landscape is critical. Exit timing may be influenced as much by fund dynamics and LP pressures as by company performance.
From our perspective at Sampford, one theme stands out: preparation and positioning will separate successful exits from stalled processes. In a market defined by a double cohort of maturing assets, the companies that articulate a compelling, data-driven, and forward-looking story will command attention, and value.
The wave is coming. The question is not whether assets will trade, but which ones will be ready when buyers engage.