U.S. PE Firms Slowly Reducing Inventory Of Aging Portfolio Companies

0
U.S. PE Firms Slowly Reducing Inventory Of Aging Portfolio Companies

U.S. PE Firms Slowly Reducing Inventory Of Aging Portfolio Companies by Garrett James Black, PitchBook

After climbing steadily for several years, the median hold period of U.S. PE-backed companies roughly leveled off between 2013 and 2014. From there, the hold period for companies exited via IPO briefly leapt upward in 2015, only to plunge once more this year—probably more a reflection of the recent scarcity of IPOs than anything else—while hold periods for companies exited via secondary buyouts and strategic acquisitions also fell.

Carlson’s Double Black Diamond Ends 2021 On A High

Black DiamondIn December, a strong performance helped Carlson Capital's Double Black Diamond fund achieve a double-digit return in 2021. Q4 2021 hedge fund letters, conferences and more Double-Digit Return According to a copy of the latest investor update, which ValueWalk has been able to review, Clint Carlson's Double Black Diamond fund returned 2.9% in December and Read More

Interestingly, the exit route that saw the steepest decline was PE-to-PE, which has several implications, as this number isn’t skewed at all given the considerable number of SBOs that have occurred thus far.

  • First, PE firms are increasingly sourcing in their peers’ portfolios, as there’s a distinct lack of original, quality companies for sale.
  • Second, buyers are often rationalizing such purchases through their perceived ability to achieve further operational improvements, typically by already possessing resources and specialist operating partners to devote to companies in a particular sector.
  • Finally, GPs selling in these sponsor-to-sponsor transactions are obviously happy to unload companies and achieve liquidity, while those on the buy side are clearly eager to put dry powder to work—whether or not their LPs are excited about the prospect of such recycling among the PE industry.

It’s illustrative of the twin, often-competing pressures GPs are currently facing: the need to put capital to work and the lack of original targets. Both are symptomatic of how the buyout cycle is slowly winding down.

Note: This column was previously published in The Lead Left.

Download the full U.S. PE Breakdown for free!

Updated on

No posts to display