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Private equity’s bubble vintage may fizzle

It matters not just what you buy but when you buy it, and 2021 wasn’t a great moment to deploy capital

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    • Some of the industry’s best returns came during or following recessions, as starting valuations were lower and there was less competition to acquire assets.
    • Some of the industry’s best returns came during or following recessions, as starting valuations were lower and there was less competition to acquire assets. PHOTO: REUTERS

    Chris Bryant

    Published Mon, Nov 27, 2023 · 07:24 PM

    PRIVATE equity (PE) firms that spent hundreds of billions of dollars on acquisitions at the top of the market risk a nasty hangover.

    A combination of higher interest rates and lower valuations could lead to disappointing returns for deals struck in the frothy mid-2020 to early 2022 period, after which borrowing costs rose sharply. In industry parlance, it’s shaping up to be a disappointing “vintage”.

    While another bull market or interest-rate cuts could spare PE firms some blushes, the onus is on them to deliver operational improvements rather than relying on rising valuations to generate profit for their investors. They won’t all pass the test.

    Private equity

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