Attention, corporate development executives: the overhang of unsold private equity portfolio companies has never been higher.

It’s true — private equity firms are sitting on the largest collection of unsold portfolio companies (“overhang”) in the history of the asset class…and the glut is enormous: an estimated 6,500 unsold portfolio companies as of year end, representing almost 70% of private equity firms’ total assets under management as of Sept. 30 of last year. That is the highest number of unsold portfolio companies ever recorded.

“The overhang that is not sufficiently talked about is not the overhang of capital, but the overhang of older portfolio companies and older funds that have not been sold and need to be sold. What ends up happening to this glut of unsold portfolio companies could have a big impact on the entire private equity industry. Firms can’t sell their portfolio companies because they are worth less than their original investment,” says Michael G. Fisch, president and CEO of American Securities LLC.

And PE firms can’t play the waiting game forever. GPs may gain slightly on the multiple by holding out for a better price, but it will also dilute the time-based math of the internal rate of return, a key factor for PE fund raising. A fine balance must be struck.

What will happen to all these private equity portfolio companies…will strategics step in to buy them? When will they get sold? Will the realized PE returns affect the size and viability of the private equity industry? Stay tuned…

Posted by: Mory Watkins; portions excerpted from a recent article in Pensions and Investing Magazine by Arleen Jacobius