Perspectives & Research

The Exit Paradox

The EY Global Private Equity Exit Readiness Study 2026 reveals a persistent and costly paradox: portfolio company performance is, in many cases, strong — yet exits remain constrained and valuations fail to reflect underlying performance. In the UK, the average holding period for PE investments exited in 2025 stood at almost seven years. Sixty-two per cent of 2026 exits are sponsor-to-sponsor transactions, up nearly 23 percentage points in three years.

The 24-Month Preparation Framework

• Phase 1 — Strategic Positioning (Months 18–24): Define the equity story, assess likely buyer categories, identify the value-creation gap, begin data room infrastructure
• Phase 2 — Value Creation Acceleration (Months 12–18): Revenue quality improvement, margin trajectory, management preparation, AI and technology positioning, governance
• Phase 3 — Process Preparation (Months 6–12): Vendor due diligence, financial reporting quality, management information systems, warranty & indemnity insurance
• Phase 4 — Process Execution (Months 0–6): Management presentations, competitive tension maintenance, valuation gap bridging via earn-outs or vendor loan notes

Exit Route Selection in 2026

Trade sales to strategic acquirers remain the most common path and often command a premium where synergies are identifiable. Secondary buyouts account for 62% of current exits but typically compress returns. A pipeline of IPO candidates is building under the overhauled UK public offers regime that came into force in January 2026. Continuation vehicles provide accepted mechanisms for sponsors managing assets requiring more time to mature.

This document has been prepared by Radiant Capital Partners for informational purposes only. It does not constitute investment advice. Radiant Capital Partners Ltd is not authorised or regulated by the FCA.

The Numbers That Define the Moment

UK startups raised $17 billion in the first half of 2026 — the strongest six-month fundraising period since 2022. Artificial intelligence companies captured 74% of all venture capital deployed in the UK during the period. The UK's share of European deep tech and life sciences funding reached 41% in H1 2026, up from less than a quarter just six months earlier.

The Structural Foundations

• University spinout pipelines: Four of Europe's top 15 AI hubs are in the UK — London, Cambridge, Oxford, and Edinburgh
• EIS and SEIS advantage: SEIS offers 50% income tax relief on investments up to £250,000; EIS provides 30% relief on up to £1 million — among the most generous early-stage incentives in the developed world
• Global capital access: Sequoia, Accel, Lightspeed, and Andreessen Horowitz all maintain significant London offices. The UK hosts 80 unicorns with a combined value of £242 billion

Beyond AI: The Broader Deep Tech Opportunity

Biotech and life sciences, cybersecurity, climate technology, defence technology, and quantum computing all present compelling opportunities that receive less attention than AI but carry strong long-term structural tailwinds. Deep tech's share of UK investment nearly doubled year-on-year in H1 2026.

This document has been prepared by Radiant Capital Partners for informational purposes only. It does not constitute investment advice. Radiant Capital Partners Ltd is not authorised or regulated by the FCA.

The Question Every Sponsor Should Ask Sooner

When does exit preparation begin? For many sponsors, the honest answer is: too late. EY's Global PE Exit Readiness Study 2026 is unambiguous: preparation commencing 12 to 24 months before sale measurably improves exit valuations. The single most important factor that management teams cite when asked what they would do differently: better preparation of the management team.

Revenue Quality: The Metric Buyers Scrutinise Most

In the current market, revenue quality has displaced revenue growth as the primary metric buyers use to establish valuation confidence. Key dimensions include contractual support (multi-year agreements, not merely historical repeat business), customer concentration (above 20–25% in a single account is a consistent discount trigger), pricing power, and AI positioning — a credible, implemented AI strategy is now an emerging exit differentiator.

Management Team Preparation

Executive coaching, consistent messaging across buyer meetings, financial literacy across the senior team, succession planning beneath the C-suite, and scenario planning fluency: these are the management preparation investments that compound into meaningful valuation premiums at exit.

Vendor Due Diligence: The Preemptive Advantage

A buyer who discovers a material issue during their own due diligence has negotiating leverage. A vendor who discovers the same issue in advance can address it before any process begins — and before the buyer has acquired any negotiating advantage from the discovery.

This document has been prepared by Radiant Capital Partners for informational purposes only. It does not constitute investment advice. Radiant Capital Partners Ltd is not authorised or regulated by the FCA.

Introduction

As more businesses choose to remain private for longer — the number of PE-backed companies in the UK has grown steadily as the number of publicly listed companies has declined — a portfolio restricted to public markets is increasingly missing the most dynamic phase of corporate value creation.

How Private Equity Funds Work

Most PE funds are structured as limited partnerships. The general partner raises capital from limited partners and manages the fund, typically committing approximately 5% of the fund's capital — ensuring genuine alignment. Investors do not transfer capital on day one; instead, the GP makes capital calls as investment opportunities are identified. The average holding period for UK VC investments exited in 2025 was almost seven years.

EIS and SEIS — The UK Tax Advantage

SEIS offers 50% income tax relief on investments up to £250,000 in qualifying companies. EIS provides 30% relief on investments up to £1 million per tax year. Both schemes also offer capital gains tax deferral and, for qualifying companies, inheritance tax relief after two years of ownership. These incentives materially alter the risk-return profile of early-stage investment for eligible UK investors.

Questions Worth Asking Before You Commit

• What is the manager's track record across multiple fund vintages, including through periods of market stress?
• How does the manager generate returns — through financial engineering or genuine operational value creation?
• What are the fee terms, and are they aligned with long-term LP interests?
• What is the exit strategy, and how does the manager think about realisation in the current environment?

This document has been prepared by Radiant Capital Partners for informational purposes only. It does not constitute investment advice. Radiant Capital Partners Ltd is not authorised or regulated by the FCA. Please read the Regulatory Notice for full details.