Breakingviews - Buyout barons will find ways to douse fire sale

LONDON, Dec 27 (Reuters Breakingviews) - If necessity is the mother of invention, fans of financial engineering have a treat in store from private equity titans in 2025. The buyout industry has been sitting on portfolio companies for longer than usual. The question is whether KKR (KKR.N), opens new tab, EQT (EQTAB.ST), opens new tab, CVC Capital Partners (CVC.AS), opens new tab and the rest can avoid taking markdowns when offloading their giant backlog of assets. Some innovative disposal tricks will help.

Carlyle (CG.O), opens new tab, Stephen Schwarzman’s Blackstone (BX.N), opens new tab and others on average sold $430 billion of investments per year from 2022 to 2024, according to Preqin – well below 2021’s record high of over $800 billion and lower even than the average for the three years before the pandemic. That’s striking since assets under management have almost doubled since 2019.

From 2017 to 2021, the industry on average offloaded about one-third of its holdings each year, according to Breakingviews calculations using Preqin data. Since 2022, exits have run at roughly half that rate, implying hundreds of billions’ worth of “missing” disposals.

The impetus to change that is clear. Buyout barons can’t spend much more money until they realise some cash from old stuff. That’s because investors like pension funds often rely on profits from past funds to back newer ones. From 2022 to March 2024, the sector called up $136 bi...
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