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Quarter-End Insights

Private Equity: Capital Deployment Remains a Challenge

Despite record amounts of capital overhang and demonstrated interest for the asset class, valuations and heightened competition continue to constrain deal flow.

  • Record EV-to-EBITDA multiples continue to challenge capital deployment.
  • With a significant portion of PE-backed inventory acquired over the last 3.5 years, we expect exit flow to continue sliding as we are still a couple of years away before many of these assets are ready to be sold.
  • With over $1 trillion distributed to LPs since the beginning of 2014, LPs have recycled a significant amount of capital back to the same fund managers who provided such distributions. Although we believe many managers will be able to sustain their relative outperformance over other asset classes, we do expect return profiles in newer vintages to decline given today’s heightened valuations and competitive auction processes. Further, fund lives could continue to extend as managers look to maintain quality and price discipline—the result of which could put pressure on time-sensitive IRRs.