Hidden Risks in PE: Navigating the Next Chapter of Due Diligence

The Ropes & Gray U.S. Private Equity Market Cap Report - September 2025 highlights a market that is stabilizing, but far from simple or predictable. Deal values are rising, secondary listings are breaking records, and the IPO window is reopening. Yet liquidity pressures, longer hold periods, and a backlog of pending exits are creating a more complex environment for investors to manage through. 

As PE firms navigate these mixed signals, one theme is increasingly clear: sustained momentum will depend not just on capital deployment, but on disciplined, verifiable background information into the people and entities behind each transaction. The risks may not always appear clearly in market data, but they grow more significant as deal structures evolve and timelines are extended. 

Larger Deals, Larger Stakes  Overall deal count may be down 5% YTD, but deal value is up 30%, and nearly 40% of deals now exceed $1B. With more capital flowing into fewer, higher-value transactions, firms naturally face greater exposure when something is missed early in the diligence process. 

In this context, large transactions can magnify vulnerabilities tied to: 

• Leadership integrity 

• Historical legal or regulatory issues 

• Undisclosed affiliations 

These elements often lie outside the financial reporting framework, yet understanding them is essential to assessing long-term outcomes and managing exposure in larger deals. 

Longer Holds Reinforce the Need for Ongoing Clarity  The report notes that average holding periods have climbed to 6.4 years, their highest in more than a decade. At the same time, five-year DPI is at its lowest point, and although exits are improving year-over-year, they remain insufficient to relieve the backlog. 

Extended ownership inevitably changes the risk equation. Even when initial diligence appears comprehensive, new risks can surface over time as holdings mature. This indicates that sponsors are increasingly encouraged to maintain clear and consistent visibility into management history, leadership conduct, and potential reputational exposure across multi-year horizons, supported by fact-based, verified, auditable diligence that keeps insights defensible as risks evolve. 

A Record-Breaking Secondaries Market Intensifies People Risk  The report shows the secondaries market surpassing $100B in transaction value in the first half of 2025, marking unprecedented activity. As secondaries accelerate, so does the need for deeper visibility into affiliated counterparties. 

While the report focuses on volume and fundraising strength, the underlying dynamic is clear: increased liquidity pressure means sponsors and LPs are exchanging ownership at a faster pace, heightening the importance of understanding reputational history, conflicts, and past regulatory exposure. Every secondary transaction involves not just an asset, but the people and decisions that shaped it. 

The IPO Window Reopens and Scrutiny Follows  Seven PE-backed IPOs priced over the summer months, with additional filings into fall. Even if activity remains below pre-pandemic levels, public listing introduces an entirely different level of regulatory, media, and investor scrutiny. 

For firms preparing a company to go public, the diligence lens widens substantially. In our experience, leadership vetting has become a material part of risk management, as executives and board members are increasingly evaluated through the same public-market scrutiny investors apply to the business itself. Ensuring that key individuals can withstand that level of examination is now tied directly to valuation and listing success. 

Why Modern PE Requires Modern Diligence  Across the trends highlighted in the Ropes & Gray report, larger deals, longer holds, record-breaking secondaries, and the reopening IPO window, a common thread emerges: private equity is operating in an environment where people risk matters as much as financial performance. 

Intelligo pairs AI with human-enhanced intelligence to generate a 360° profile of any person or company. Advantage Reports are fact-based, analyst-examined, and auditable, giving sponsors and investors a defensible record of decisions, even as portfolios evolve and new risks emerge. Those reports paired with continuous monitoring, provide an additional layer of ongoing visibility, allowing even the most complex cases to be navigated from pre-investment diligence to executive vetting and beyond, helping decision-makers know the facts, assess the risk, and decide with confidence.

Source: Ropes & Gray LLP, U.S. Private Equity Market Cap Report - September 2025.