[basseq]

This is neither prescient nor particularly insightful. Private equity metrics have been down for a while: fundraising down 20% since 2022, distributions down 11%, deal value and count down 60% and 35% respectively, exit value down 24% YoY.

PE is fueled by interest rates, and the entire thesis has flipped from revenue/growth to EBITDA. The shift is exposing some dogs: both PortCos that can't hide fundamental business model issues behind cheap capital and PE firms that can't lead operations and financing in a new environment. The correction is well underway.

[threecheese]

What does “correction” look like in your opinion? PE impacts quite a lot of the job force, 8-9% of GDP; do these companies get sold, or just squeezed dry, to try and recoup investments during zirp?

[basseq]

A couple different ways to answer that question.

For portcos, you'll definitely see the focus on costs. That means restructuring/layoffs, contraction from non-key markets, and reduced growth initiatives.

PE is going to be loathe to sell at a loss, though you'll see some horse-trading between some firms. So that would be a last resort, though we are already seeing some write-downs, like Vista/PluralSight last month[1].

More broadly, you'll see lower valuations and tightening in the credit markets that may affect macroeconomic slowdowns.

Most of this isn't exclusive to PE: interest rates and other drives are affecting non-PE similarly in the form of increased borrowing costs, tighter credit conditions, and general economic uncertainty. The contrarian view may be that PE portcos are better able to navigate those waters given the focus on business fundamentals and operating maturity.

[1] https://www.axios.com/2024/05/31/vista-equity-pluralsight