Exits are dead and holds are stretching to a decade.

Exits are dead and holds are stretching to a decade.

The Carry · October 25th. 6 min 16 sec.

Cold open

Brookfield is squeezing 300 million dollars of recurring EBITDA out of physical assets by deploying AI straight onto the factory floor. We're talking about century-old businesses barely using Excel properly, suddenly running predictive maintenance. Sponsors are finally waking up. They can extract pure software margins directly from their legacy physical assets.

Intro

This is The Carry for October 25th. We went through the week's top private equity podcasts so you don't have to. We tracked the data, listened to the dealmakers, and pulled the best insights from the market. Here's what actually mattered. Let's get into it.

Industrials beat software at AI

The rotation away from pure-play tech is happening right now in the middle market. Heavy industrials are quietly beating software at the AI game. Brookfield is finding massive opportunities in boring businesses. On Dry Powder, Anuj Ranjan laid out exactly how this looks on the ground. His team is buying billion-dollar revenue companies that still struggle with basic Excel. They skip the classic, painful enterprise software migrations entirely. No decade-long ERP rollouts. They go straight to deploying machine learning for predictive maintenance and dynamic pricing directly on the factory floor. That fundamentally changes the margin profile. It creates massive value without paying tech multiples. The data backs this up perfectly. Sean Mooney tracks this pipeline, and on Karma School of Business, he called out a 175 percent surge in third-party AI scoping projects last quarter alone. The highest volume of that demand came straight from industrial services. Buyers are figuring out the new math. Industrial portfolio companies are using point solutions to automate technician routing and inventory management. They skip the bloat. Sponsors realize they can squeeze software-like margins out of physical assets. That's the signal. The market bypasses the traditional tech headaches and jumps straight to the raw efficiency gains. Buyers are pricing this in right now, recognizing that real value creation comes from applying these tools to legacy infrastructure. Heavy industry is just a better playground for machine learning right now.

Holding periods stretch to a decade

Exits are completely stalled out, and holding periods are stretching toward a decade. Sponsors keep hoping a reopening public market will suddenly clear their balance sheets. They're staring at the wrong math. On Private Equity Spotlight, Erik Hirsch broke down the reality. The vast majority of private equity inventory sits way below the one billion dollar enterprise value threshold required for a modern listing. He was blunt about it. The idea that the IPO market will act as the saving grace for private markets is simply untrue. Assets are getting trapped. When a deal stays in a portfolio for six to ten years, the original operating plan fractures. The three-year flip breaks down entirely. Over on Karma School of Business, Sean Mooney pointed out that sponsors lack the clear six-month forward visibility they need to even launch an exit process. This delay is forcing a massive shift in operations. Traditional executive search is dropping fast. Sponsors are scrambling to rent interim C-suite leaders for late-stage cleanups. It's a fundamental shift in portfolio management. We're seeing a surge in demand for rent-to-own leadership because the original management teams are burning out before the exit window opens. LPs expect longer holds, and deal teams are completely reevaluating how they staff the back half of a traditional fund cycle.

Erik Syvertsen

Erik Syvertsen joined How I Invest to cut through the persistent myth of a unified venture capital asset class. He explained how early-stage check writing and late-stage capital deployment require completely different operational playbooks and risk profiles. He noted that venture capital operates as two distinct asset classes, and that breaks at seed, making the approach to early-stage totally different from growth and later stage. It's a critical distinction for any LP mapping out fund allocation right now. The underwriting mechanics at seed have zero overlap with a Series C momentum trade. Buyers are starting to map their exposures accordingly. They price the risk completely differently when the asset class splits right down the middle like that.

Erik Hirsch

Erik Hirsch jumped on Private Equity Spotlight to deliver a very blunt reminder about the underlying mechanics of continuation vehicles. He wanted to clarify exactly what the booming secondary market actually accomplishes for a sponsor's highly constrained balance sheet. He noted that the secondary industry in and of itself doesn't create ultimate liquidity at the asset level, it simply allows pieces to be moved from one investor to another. That's the exact reality check the market needs right now. Continuation funds function strictly as a powerful balance-sheet tool for sponsors rather than an actual realization of enterprise value. It just shuffles the paper around the ecosystem. The underlying portfolio business still has to generate actual cash returns down the line.

Tim McCusker

Tim McCusker went on How I Invest to explain why major institutional limited partners with thirty-year liabilities still fail to make contrarian bets during deep market drawdowns. He pointed straight to the structural misalignment between daily compensation models and long-term investment horizons. He pointed out that everyone gets paid on an annual comp cycle, and that's just way too short of a time frame to properly evaluate investment performance. It creates a massive behavioral bottleneck for deploying capital in a downturn. Investment committees naturally optimize for their year-end bonus rather than the generational returns they're technically mandated to capture. The internal incentive structure actively punishes the exact kind of contrarian risk required to systematically beat the market.

The bottom line

Extending a hold period from three years to ten means sponsors are no longer flipping paper. They're operating real businesses. The standard financial engineering playbook breaks down entirely over a decade. Value creation actually requires digging into the operations, ripping out bad software, and bringing in interim executives to clean up the mess. That's The Carry. See you next Sunday.