AmiSight 10/21: Private Equity’s Cheap-Money Hangover
Private equity got used to a world where borrowing was cheap and selling a company for a profit was easier. That world has changed. The Wall Street Journal recently reported higher rates are making it harder for buyers to finance deals, harder for funds to sell companies, and harder for firms to raise their next fund. Smaller firms are feeling the squeeze first. Some are losing employees who had been counting on payouts that may not come, while others are reconsidering whether to raise another fund at all. U.S. private-equity fundraising reached $222 billion through September 30, compared with $330 billion for all of last year.
There’s a lesson here for any business that built its plans around easy money or a strong exit. A company can look fine on paper and still have a cash problem. And when the conditions change, the plan has to change with them.
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