The Second Bite That May Never Come: Why Private Equity Sellers Are Getting Stuck

For years, private equity firms have pitched business owners a familiar narrative: sell a majority stake today, roll a portion of equity into the platform, and in a few years, enjoy a bigger payday when the firm exits. This “second bite at the apple” has become standard language in PE conversations.

But in 2024, the market realities are telling a different story.

Private equity firms are now sitting on a record number of unsold companies—over 30,000 globally, according to PitchBook. Liquidity in exit markets has slowed, valuations are compressed, and hold periods are stretching longer than ever. In fact, median PE hold times have now passed six years, and many GPs are holding assets even longer, waiting for better pricing environments that may not come.

Add in higher interest rates, lender caution, and LP redemption pressure, and it’s clear: the second bite isn’t what it used to be.

The Roll-Up Model: A Major Contributor to the Backlog

One of the biggest contributors to this exit gridlock is the roll-up model itself.

As outlined in our recent post Why the Roll-Up Model Is Breaking, PE firms spent the past decade acquiring fragmented, founder-led businesses and bundling them together into larger platforms. The theory was simple: scale drives valuation. But in practice, it hasn’t worked.

Here’s why:

• Most sectors targeted by roll-ups—especially essential services—are deeply fragmented, with no clear playbook for integration.

• Sellers often stay too short or leave entirely, leading to a loss of institutional knowledge and operational control.

• Local dynamics are ignored, and what made the business valuable in the first place is stripped away by centralized decision-making.

• PE firms assume scale automatically leads to efficiency. But in small business sectors, scale without synergy just leads to complexity and cost.

The result? Platform companies that are too big to manage but not big enough to sell.

Now they sit on PE books—generating little cash flow, unable to exit, and dragging down returns across portfolios.

For Sellers, the Second Bite Is Now a Long Wait in Line

For the seller, this dynamic creates a dangerous trap.

You sell to PE. You take some cash upfront and roll equity into the platform. You’re told there’s a second exit in 3–5 years.

But then:

• The platform doesn’t grow as expected.

• The market shifts.

• The firm can’t find a buyer.

• Your equity becomes illiquid, tied up in an entity whose value you can’t control.

And if your business is in a commoditized or overheated sector, that second bite may not just be delayed—it may never come at all.

Worse, you’re likely not alone. These roll-ups now often include dozens of sellers like you—all waiting on the same exit.

In other words: get in line.

Legacy Offers a Different Kind of Second Bite

At Legacy, our strategy is fundamentally different. We aren’t building companies for a flip. We’re building a network of essential, independently run service businesses—and holding them for the long term.

Our “second bite” isn’t about a future transaction. It’s about real-time participation in cash flow and long-term ownership in a local portfolio.

Here’s how that looks for sellers:

• You maintain a minority ownership stake in your company—and in the broader Legacy network.

• You receive distributions from actual free cash flow, not paper gains tied to a potential exit.

• You join a locally run, thematically linked group of companies with shared services, operating support, and growth capital.

• You’re not betting on multiple arbitrage—you’re building something durable, with economic upside every year, not just on a sale.

This isn’t private equity. It’s something closer to a holding company—patient, long-term, and aligned.

Why This Matters Now More Than Ever

We’re at a turning point.

Private equity’s backlog of unsold businesses is no longer just a capital markets issue—it’s a structural challenge for sellers. Founders who sold under the old playbook are discovering they’ve traded independence for indefinite limbo. They’ve hitched their futures to funds with rigid timelines and uncertain exits.

The new model is one that emphasizes:

• Cash over paper value

• Time in, not timing out

• Strategic independence, not top-down integration

That’s the model we’re building at Legacy—and it’s resonating with sellers who want to stay involved, protect their legacy, and own something they can actually touch.

Because the second bite should feel real.
Not like a waiting room.