Insights From Recent Pe Reports

The private markets reset is here and it’s getting more competitive. The fog is clearing and there is a power reshuffle across the ecosystem: 💥 𝗖𝗮𝗽𝗶𝘁𝗮𝗹 𝗶𝘀 𝗺𝗼𝘃𝗶𝗻𝗴 𝗱𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝘁𝗹𝘆  • LPs are no longer just passive. They’re building liquidity through secondaries and buying stakes in GPs themselves.  • Fundraising? Still tough. But smart midmarket players are thriving while mega-funds stall.  • Retail and high-net-worth investors are quietly fueling new AUM channels via evergreen and semi-liquid structures. 📉 𝗧𝗵𝗲 𝗼𝗹𝗱 𝗽𝗹𝗮𝘆𝗯𝗼𝗼𝗸𝘀 𝗮𝗿𝗲 𝗯𝗿𝗲𝗮𝗸𝗶𝗻𝗴  • Financial engineering alone isn’t enough. Exit backlogs are worse than they've been in two decades.  • IRR isn't the only metric anymore MOIC and real distributions matter more than modeled upside. 🚀 𝗪𝗵𝗮𝘁’𝘀 𝘄𝗼𝗿𝗸𝗶𝗻𝗴 𝗻𝗼𝘄  • Deals over $500M are surging. Sponsors are writing bigger checks with more conviction.  • Operators are doubling down on real value creation with AI-enabled ops, cash generation, and exit prep that starts years in advance.  • Public-to-private is back. Expect even more as sponsors look for undervalued public gems. 🧠 𝗪𝗵𝗮𝘁’𝘀 𝗻𝗲𝘅𝘁?  • Expect more verticalized GP platforms, continuation vehicles, and cross-border carveouts.  • Watch for Asia's rebound (post-China retrenchment), and the continued rise of AI in fund ops.  • And if IPOs remain frozen, expect long-term corporate acquirers to gain leverage.  • 2025 isn’t about waiting for better conditions. It’s about proving you can win in these conditions. #PrivateMarkets #PrivateEquity #Fundraising #Secondaries #LPstrategy #OperationalExcellence #GPstakes #VentureCapital #AIinFinance #NextGenPE

Private Equity Overhang: MSCI Exit Data Report Proves Large Scale Overvaluation of PE Companies I have posted several times that the $3.6T of unsold PE companies results from overvaluation of the portfolio companies (PortCos). Previously I used NAV discounts on secondary LP sales as proof of overvaluation. MSCI recently published data that offers more direct proof that unsold PE companies are materially overvalued. As always, comments / counterpoints appreciated. Before turning to MSCI’s report, I will walk through the implications of PE overvaluation once true value is revealed: 1) NAVs get crushed – because NAVs are based on PortCo enterprise value less debt, the high leverage means that reversing the overvaluation could wipe out a large part of the NAV. 2) The recent growth of NAV loans adds to the risk. NAV loans are senior to PE Fund investors and therefore NAV lenders could wipeout NAV, in whole or in part, depending on the specific terms of the NAV loan. Double leverage at the PortCo and fund level was a dangerous trend.   3) Impact on returns: I simulated the impact of the overvaluation on IRR using a fairly simple python PE IRR model. As shown in the attached chart, it doesn’t take much of an overvaluation to materially drive down IRRs. IRRs on funds with a small percentage of exits realized could be significantly reduced once the stale companies exit at true value or are revalued lower (see my chart and comments on CalPERS PE Funds below). The true valuation day of reckoning could also (finally) force pension funds to lower PE sector return forecasts, which would increase pension deficits.   4) GP carried interest: Once PE funds adjust valuations to market, returns may drop below carried-interest hurdle rates. This could result in a sharp drop in carried interest as well as subject GPs to clawback of prior returns (depending on the fund structure). Note: carried interest are the returns earned by the General Partner or GP. MSCI Report The MSCI report, ominously titled: “Depressed Distributions No End in Sight”, highlighted the counterintuitive observation that the exit multiple of sold companies is LOWER than the multiple of the held PortCos despite the fact that the stale/held companies have rising leverage and lower profitability. The MSCI data makes the convincing case that stale PortCos are overvalued assets – not companies waiting to unlock value.  See images for MSCI quote and chart. CalPERS PE Fund Data Reveals Material Hung PortCo Risk To get a sense of the magnitude of the PortCos exit overhang, I reviewed CalPERS PE fund performance data (see chart). I calculated the remaining non-exited value as a percent of total value and plotted each fund by vintage years from 2011-2021. As the chart shows, even very seasoned PE funds have a substantial number of funds where remaining exit value is over 50% of the total value. #pensionfunds #privateequity #leverage #debt #pebubble MSCI Inc.

Private Thoughts From My Desk………. #37 It’s Time to Clean Out the PE Attic   There’s a musty corner in every LP’s private equity portfolio: a collection of tail-end buyout funds that quietly aged past their prime. They once promised 2x+, but now they're clinging to dusty assets with fading upside and growing risk. The latest data confirms what most LPs already suspect: by year 12, TVPI begins a universal decline……across top, middle, and bottom quartiles. Value doesn’t just plateau. It erodes.   And yet, many institutions cling to these positions. Why?   Maybe it’s inertia. Maybe it’s hope. But in today’s low-distribution world, that’s expensive optimism. PE holding periods are stretching. Upwards of 30% of portfolio companies are now held for over seven years. That means more capital locked up, more fees paid, and less flexibility to pursue new opportunities. Meanwhile, the secondary market is maturing. Volume is up 83% in five years. Tools abound…..classic LP portfolio sales, GP-led restructurings, NAV-based loans. There’s no longer a good excuse for being passive.   If you’re a portfolio manager, this is the call: Get aggressive. Run the numbers. Rank your funds by vintage and quartile. Anything sub-median and older than a decade? It deserves scrutiny. Be proactive in managing exits, because in private equity, dead money is worse than dry powder.   But this isn’t just an LP story.   GPs, especially those interested in fundraising, should expect more pushback. This pushback can come on fund extensions, on fees, on the status quo. The bar is rising, and the leash is shorter. If you’re asking LPs for extra time, be ready to show real value creation, not just the passage of time.   Better yet, do the work before you're asked. Re-underwrite the tail. Dust off those 5+ year hold companies and pressure test whether they still have upside under your ownership. If the answer is yes, prove it. If the answer is no, sell them to someone with a fresh idea and the conviction to act on it.   Because in this environment, nimble capital wins, and the attic isn’t getting any less crowded.   #privateequity #privatemarkets #privatethoughtsfrommydesk

I've been talking with various friends in private equity recently. PE firms that invest in software are in for a weird few years ahead. I'm focusing on two very broad categories of software investors: 1) Platform aggregators: PE firms that buy large platform companies in competitive markets. 2) Niche Optimizers: PE firms that buy smaller software companies in sub-venture scale niches. They both try to roll up smaller players, streamline processes to cut costs, boost sales teams and try to exit for 3x in a few years. But they're in very different strategic positions given the technological shift that's underway. The former group are about to get gut punched. The latter group might do just fine. Let's break it down briefly: -Platform Aggregators: PE firms that buy larger software companies in competitive markets almost universally fail to invest heavily in R&D and can't recruit top tier engineering talent. In other words, innovation slows considerably. Historically, that's been ok because they find ways to cut costs, boost sales and generally grow cash flow in short order before flipping the company. But no longer - that playbook is about to break down. In the age of AI, it's way easier to start a company and PE-backed competitors like these look like very appetizing targets. An AI-native startup with a strong founding team is going to build a better product and be far more agile than a PE-backed dinosaur trying to append AI to their legacy codebases and products using outsourced engineering or second rate engineering teams. The risk/reward profile of these large acquisitions is going to start looking like a bad bet quickly as AI native companies eat into their profits. -Niche Optimizers: PE firms that buy sub-venture scale companies may actually do better than they did previously. The key reason is that these companies won't attract as much competition because they aren't likely to grow as big. At the same time, smart PE firms can buy off-the-shelf AI products to accomplish their goals of cutting costs and driving sales, leading to improved cash flow growth relative to what was possible pre-LLMs. So, the small players may do fine but I'd bet on the bigger brand name firms running into trouble. There's a wave of AI native startups coming and it's going to wash away the legacy SaaS slop in large vertical after vertical over the next few years. I wonder how many PE firms know what's about to hit them?

The biggest risk to Private Equity is the "Private" The greatest risk in private equity today isn’t macroeconomic, it’s operational opacity. The traditional PE model was built for a different era. Value came from financial engineering, multiple arbitrage, and access to proprietary deals. But that edge is eroding. In today’s environment, outperformance is operational, and operational performance depends on information flow, collaboration, and speed of execution. To drive true value creation, we need to replace secrecy with systemization. Here’s what needs to change: 1. Build Cross-Portfolio Benchmarking as Infrastructure Every portco should be benchmarked against its peers within the fund, not just in financials, but in marketing efficiency, conversion rates, hiring velocity, cost per acquisition, and customer lifetime value. If one company has cracked paid search or inside sales hiring, that playbook should become shared IP. 2. Operational Networks, Not Just Financial Controls Private equity firms love finance controls. Weekly cash reports, 13-week forecasts, capex committees. But the same rigor rarely exists on the operational side. Create centralized communities for operators, CMOs, heads of CX, GMs, who meet regularly, share dashboards, discuss tools, vendors, campaigns. 3. Institutionalize Lessons Learned Too often, learnings die when an operator leaves or a project ends. Start documenting success (and failure) systematically. Turn execution into a knowledge system so the fund learns faster than any single company can on its own. 4. Elevate Reporting from Static to Strategic Replace monthly board packs with real-time dashboards built around leading indicators and value creation metrics. Marketing ROI. Sales cycle velocity. CAC payback. Not just results, but drivers. Tie every operating initiative to value impact and make it visible across the firm. 5. Standardize the Tech Stack Across PortCos Create a preferred tech stack for analytics, CRM, call tracking, customer support, and marketing. Standardization speeds up execution and simplifies measurement. 6. Start Acting Like a Platform, Not a Portfolio Most PE firms own a portfolio but don’t operate a platform. The difference? A platform connects. It has shared services, knowledge transfer, centralized support, and execution leverage. Treat every new company not as a blank slate, but as an opportunity to plug into something bigger. The result will be speed, insight, and scale. By making the private less private, we shorten the learning curve, eliminate redundant work, and compound wins across the portfolio. The future of PE is connected, data-driven, and collaborative. The firms that unlock it will separate from the pack. Not by doing more deals, but by doing smarter work.

Private equity firms don’t make money sitting on cash. They make money on deployed capital. So why are they sitting on over $1 trillion in dry powder? One word: Risk. When buyers can’t accurately assess risk, they either: Don’t invest, or Demand higher returns. Right now, we’re in a period of massive uncertainty: interest rates that could go up … or down. Trade policies that shift weekly. Economic indicators sending mixed signals. Regulatory environments in flux. I’m aware of three manufacturing deals that fell apart in the last month. Not because the businesses weren’t solid. But because buyers couldn’t model future performance with confidence. When your input costs are tied to tariffs that might not exist next quarter, How do you price a five-year investment? You don’t. You wait. But here’s the twist: While asset-heavy, exposed industries are stalling, SaaS companies with recurring revenue are still attracting high multiples. Predictable cash flow in unpredictable times is worth a premium. And that $1T in PE dry powder? It will be deployed. Partners have LPs to answer to. Carried interest doesn’t get paid on idle cash. But deployment won’t happen until there's clarity. When it does, it will move fast. If your business is insulated from trade disruptions, interest rate shocks, and regulatory chaos. If your cash flow is predictable. This is actually a great time to be in market. Less noise. Less competition. More attention from serious buyers. How stable is your business in an unstable economy?

Some very key insights regarding private equity in 2024 from PitchBook worth perusing: Private Equity Fundraising and Deal Activity - The largest publicly traded PE firms saw strong inflows into their funds in 2024 compared to the previous year, primarily driven by private credit strategies. - However, the weak exit environment from 2023 carried over into 2024, with sponsors underwhelming with realizations and exits for buyout funds and other core PE strategies. - Private credit strategies remained highly attractive, accounting for 69.8% of total fund inflows! - Private wealth and insurance channels were major contributors, making up an estimated 47.8% of private credit fundraising in 2023. Buyout Funds Outlook - The tailwinds that boosted buyout fund performance over the past decade are expected to subside in the coming years for large, high leverage buyouts counting on financial engineering for returns. - While buyout deal activity rebounded slightly in early 2024, it remained below historical averages and is likely to stay muted until interest rates decrease, but will remain robust in the small, middle buyout and growth equity markets where leverage is limited in use. - The continued migration by institutional investors towards independent and fundless sponsors transactions that pursue small, middle market buyout and growth strategies is expected to continue unabated. - Strong economic growth, low unemployment, and above-target inflation have shifted the Federal Reserve's focus away from lowering interest rates, which has a material impact on the buyout market. Venture Capital Sentiment - Venture capital fund managers are more optimistic about fundraising and the IPO market in the first half of 2024 compared to a year ago. - GPs expect asset valuations to become more attractive over the next month, supporting market activity albeit at subdued levels, but will negatively impact the valuation of their current holdings! - While AI remains a top focus area, some investors have expressed concerns about overinvestment in the sector. - Interest rates and the need for founders to temper valuation expectations remain key determinants of market activity. - While some managers have delayed fundraising plans or ruled out opening new funds, the majority cited no changes to their current fundraising plans. In summary, private equity fundraising saw a major boost from private credit strategies in 2024, but buyout funds continued to face challenges from the weak exit environment and high interest rates. Venture capital sentiment improved, with expectations of more attractive valuations, but concerns remained around overinvestment in AI and the impact of interest rates and valuation expectations. #privatecapital #privatemarkets #privatecredit #independentsponsor #fundlesssponsor #buyout #growth #growthequity #institutionalinvestor #sponsor #privateequity #gp #lp #familyoffice #hnw #uhnw #ria #registeredinvestmentadvisor #macroeconomic

10 takeaways from Apollo Global Management, Inc.'s 105-page report on private markets 1. Private markets are still small, comparatively With growth of $8 trillion over the past 10 years, private capital AUM growth is still far below public markets and bank balance sheets, with global equity market cap growth at $35T, bank balance sheet growth at $34T and global fixed income market growth at $42T over the same period. 2. Capital is concentrating in the hands of the 10 largest firms Across all private market segments, the largest 10 funds increased their share of capital raised. Within infrastructure, for example, the share that the largest 10 represented rose from around 30% to over 60% between 2022-May 2023 and the compared period of 2018-2021. 3. Private capital fundraising had a bad 2023 Across all but one private market strategies, 2023 represented a decline in capital raised from 2021 and 2022. The exception was secondaries which rose in 2023, though fund count fell. 4. North America increased its share of capital raised North America continued its dominance of the fundraising landscape, reflecting the depth of its manager and LP ecosystem. 5. The exit-to-investment ratio continues to decline The ratio has fallen relatively consistently from a high of around 0.55x in 2013 to 0.37x in 2023. Without distributions, re-ups are less viable for LPs. 6. As the number of PE-backed companies rises, median entry multiples also rise reflecting competition The exception was the mid-market, where multiples fell in Europe and North America to 11.4x EV / EBITDA, from a high of 14.3x in 2019. 7. Over 80% of private debt fundraising in 2023 was for funds with sizes over $1B, compared to less than 50% in 2009 8. Direct lending continues to be the dominant credit strategy, by capital raised Among the strategies that experienced the most significant declines from 2021-2023 were distressed debt, special situations and bridge financing. 9. Oil and gas fundraising has bounced back from historic lows in 2021-2022 Oil and gas represented close to 20% of all capital raised in real assets, up from sub-5% levels in 2021 and 2022 10. PE megafunds have the largest share of dry powder they’ve ever had, approaching $500B in 2023 Link below: https://lnkd.in/efuMVjk4 #privateequity #privatedebt #fundraising #capitalraising #ir #privatemarkets

Private Equity deal activity is rising, but so is the urgency to put capital to work and generate returns. 95% of PE firms report evaluating more deals than a year ago, driven by record dry powder and an improving rate outlook. Yet, firms are navigating a tightening deal environment that demands sharper execution. 𝗛𝗲𝗿𝗲’𝘀 𝘄𝗵𝗮𝘁’𝘀 𝘀𝗵𝗮𝗽𝗶𝗻𝗴 𝗣𝗿𝗶𝘃𝗮𝘁𝗲 𝗘𝗾𝘂𝗶𝘁𝘆 𝗱𝗲𝗮𝗹𝗺𝗮𝗸𝗶𝗻𝗴 𝗶𝗻 𝟮𝟬𝟮𝟱: 📉 Economic Uncertainty is Adding Complexity: Inflation concerns and potential tariffs are lengthening the due diligence process but not slowing deal activity. Investors are taking a more disciplined approach to structuring transactions. 💰 Interest Rates May Stay Higher for Longer: KPMG US economists now anticipate rates staying flat until mid-2026, requiring firms to adjust financing strategies and balance capital deployment with cost of capital realities. 🔄 The Clock is Ticking on Alternative Liquidity Options: Secondary transactions and continuation funds have provided temporary relief, but investors expect real liquidity. Firms must sell long-held assets and return cash—holding out isn’t a long-term solution. One notable shift: AI is now a core part of Private Equity dealmaking. 85% of PE firms are already implementing or planning to implement Generative AI—up from 61% last year—using it to streamline deal sourcing, enhance due diligence, and accelerate post-merger integration. As competition for high-quality assets intensifies, AI is becoming a critical tool for efficiency and insight in the M&A process. With capital to deploy and exits to deliver, private equity firms face a pivotal year. The fundamentals for dealmaking remain strong, but firms will need to execute with agility and discipline in an evolving market. Read the full KPMG 2025 M&A Deal Market Study: https://lnkd.in/g5JAhcuG. #KPMGPrivateEquity #MergersAndAcquisitions #PrivateEquity #CorporateStrategy #ValueCreation

Private equity appears to be back on a growth path, but the game has changed. Having worked closely with private equity clients, I’ve seen how firms must adapt to stay ahead. A few takeaways from Bain’s latest Global Private Equity Report:   1️⃣ Top-quartile firms are pulling away. The best GPs grew fund sizes by 53% last year. A clear strategy and liquidity plan are now table stakes. 2️⃣ Financial engineering alone won’t cut it. The winners drive real value—AI, operational transformation, sector expertise. 3️⃣ Exits remain the biggest hurdle. With $3.6T in unrealized value, creative liquidity solutions are no longer optional. I’ve seen this industry reinvent itself before. The firms that create value, not just wait for multiples to expand will define the next decade. Read the full report here: https://lnkd.in/gRMyCdjb