An owner sells a majority interest in a business and keeps a stake.
The buyer presents a plan: grow the company, improve operations, and pursue another sale in approximately five years. The owner receives cash at closing and hopes the retained equity will produce another meaningful payment later.
That can be an attractive arrangement.
But I would want the owner to answer one question before signing:
What happens to your personal financial plan if that second payment takes eight years instead of five?
That is a hypothetical question, not a prediction. It deserves an answer because an expected exit date and an enforceable right to receive money are different things.
The holding-period data provides context
In an October 13 study, Private Equity Info reported that median holding periods in its exit data had increased from five years to six over the previous four years.
Its analysis examined 18,612 portfolio-company exits recorded in its database from 2016 through 2026 year to date.
The study also notes a limitation: exit data measures companies that have already been sold. It leaves out companies still being held. The author expects aging investments to push the median higher, but that remains a forecast—not an established outcome.
Those findings do not establish when any particular business will sell. They do provide a reason to test a transaction against a longer timeline.
Separate the money you receive from the money you hope to receive
When reviewing an offer, I would divide the owner’s financial picture into two parts.
First is the cash actually available at closing, after accounting for taxes, expenses, and other obligations.
Second is the value assigned to retained equity and any other future payment.
Both matter. They serve different purposes in the owner’s planning.
I would be uncomfortable basing essential household spending on an assumed sale date for an investment the owner cannot sell independently.
The question is straightforward: can the owner live with the transaction if the retained stake produces no cash for several additional years?
Read the documents for the longer scenario
A presentation may describe the intended holding period. The agreements determine the parties’ rights.
I would ask the owner’s transaction advisers to explain:
Who controls the decision to sell?
Does the owner have any contractual route to liquidity?
What restrictions apply to transferring the retained interest?
Can the company require additional investment?
How could future financing affect the owner’s stake?
What happens to the equity if the owner stops working in the business?
These are review questions. The answers depend on the actual agreements.
They should be understandable before closing, while the owner can still negotiate.
Employment and ownership need separate conversations
An owner may be willing to remain involved for several years after a sale.
That does not automatically mean the owner wants the same role indefinitely.
I would discuss the operating commitment separately from the investment timeline. What does the owner want to be doing in year six? Would they still want to manage employees, travel, or carry the position's responsibilities?
Then I would compare those preferences with the proposed employment and equity terms.
A longer investment period can be manageable. A longer working commitment that the owner never considered can create a different problem.
Test the deal under three timelines
My approach would be to examine the transaction under an expected exit, a delayed exit, and a scenario in which the retained equity delivers less than hoped.
For each scenario, I would ask:
Are essential personal expenses covered?
Is there sufficient accessible cash for unexpected needs?
Can the owner meet other commitments without selling the retained stake?
Does the deal still support the owner’s reason for selling?
The point is to understand how much of the decision depends on a particular outcome arriving on time.
A delay deserves explanation
If an exit takes longer than expected, I would want to understand why.
What has changed in the business? How is the investment performing? What alternatives are being considered? How does the revised plan affect the owner?
Those questions are more useful than treating the original timeline as a countdown.
A five-year plan can be reasonable. Before relying on it, make sure the transaction still works for you when the calendar changes.
Retained equity should fit your financial plan even when the expected exit date moves.
Research source: Private Equity Info, “Private Equity Median Hold Period Set to Increase,” October 13, 2026.