Private equity industry asks how long the boom will last

Berlin — Private Equity Dealmakers are landing in Berlin for their annual gatherings, the industry is thriving and many are wondering how long the good times will last.

Armed with billions of dollars, buyout companies are already taking advantage of what was a record year of M & A (M & A), selling some of their assets at the highest price.

Private equity-backed M & A transactions doubled from $ 315.2 billion last year to a record $ 818.4 billion in the first nine months of the year, according to Refinitiv.

Meanwhile, the S & P Private Equity Index has risen 43% so far this year, compared to a 25% rise in the benchmark S & P 500.

Blackstone Group Inc., KKR & Co. Inc. Equities of the largest private equity firms, such as Apollo Global Management Inc., Carlyle Group Inc. and Ares Management, surged as the US economy recovered due to the relaxation of coronavirus regulations.

According to the data provider Pitchbook, the median internal rate of return in the private equity industry was 33% as of March 2021, the highest ever.

Despite the imminent threat of inflation, dealmakers expect the pace of activity to continue, with industry top executives incurring hundreds of millions of dollars in administrative fees.

“Sure, we’re seeing inflationary pressures and a mitigation of the pandemic,” Carlyle’s US buyout and growth co-head Brian Bernasek told Reuters. “We expect to continue to see a robust environment, but probably a little less steam in the system.”

The annual Super Return International conference is also expected to draw attention to the labor shortages faced by many US companies. This is a sign of concern for many private equity-owning companies.

“People are paid for staying at home,” said Michael Psaros, managing partner of KPS Capital, and despite the surge in demand, orders from his industrial company have been placed. He said he wouldn’t be satisfied. “The impact is a waiver of opportunity cost or profit.”

There were few large buyout deals this year, but some private equity firms have united to buy huge ones, saying that such so-called club deals could occur more often. Is raising expectations.

Most buyout companies usually take on the sole control of the company and rarely form a team.

But in June, Blackstone, Carlyle, Hellman & Friedman jointly joined Medline Industries Inc, a medical supplies and equipment company. Agreed to buy for $ 34 billion, including debt.

On Monday, Advent International, Permira Advisers LLC, and Crosspoint Capital Partners jointly agreed to keep the cybersecurity company private for a $ 14 billion transaction.

Traders say that more such transactions could occur given the availability of capital, but some have pointed out the high levels of debt in the industry.

Scott Graves, Co-Head of Private Equity at Ares Management, said:

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