Rising economic and inflationary concerns threaten to negatively impact the world of private equity. Four of the largest PE firms have reported losses in the second quarter, and declining investment values and rising interest rates may decrease the flow of new capital, making PE firms increasingly reliant on existing clients as they struggle to raise funds. And because a period of inflation this high has not been seen in decades, executives and sponsors alike lack first-hand experience on how to weather the storm.
Yet the situation is not without hope. PE investments show significantly less decline than their public counterparts — such as the S&P 500 falling 21% in their worst year since 1970. By focusing on value creation, speed, and deploying alternate investment and growth strategies, PE firms can still survive in this challenging environment. But they need their executive management teams to help them do so.
Pursuing Add-On Acquisitions During Market Volatility
“Add-ons remain the single best arbitrage available to you. Concerning exits, high quality assets are still very much in demand.”— Stewart Kohl, Co-CEO, The Riverside Company