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Private Equity Groups Hold $1 Trillion as Tariffs Hinder Dealmaking
- Private equity (PE) groups are currently holding around $1 trillion in unsold assets, which would typically have been returned to investors in a normal market climate.
- Factors such as high U.S. interest rates, inconsistent tariff policies from the White House, and geopolitical uncertainties have led to lower company valuations and prolonged retention of portfolio businesses by these firms.
- This situation has contributed to a slowdown in dealmaking activity, with mergers and acquisitions (M&A) remaining stagnant this year.
- Limited partners (LP) are growing impatient due to delayed returns, as they invest trillions of dollars in PE funds with expectations of regular profits.
- Despite initial optimism for an M&A upswing under the Trump administration, deal volume and value have remained mostly flat compared to the previous year.
- PwC's survey revealed that 30% of respondents have either halted deals or are reconsidering them due to tariff-related concerns, leading to investor dissatisfaction.
- The announcement of Trump's tariffs saw over $120 billion worth of IPO preparations placed on hold in just three weeks in April.
- PE firms are exploring alternative exit strategies, including selling businesses in parts or through 'continuation funds', as the prolonged lack of IPO opportunities poses challenges.
- General Atlantic Co-President Gabriel Caillaux highlighted the unprecedented closure of the IPO window in growth equity investing, prompting a need to reassess tactical approaches.
- The $1 trillion in unsold assets would have typically re-entered the market during a regular M&A cycle, but the current environment has led to a delay in this process.
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