Central banks around the world have been raising interest rates to combat inflation, making borrowing more expensive for everyone. That includes private equity firms, which for years have enjoyed historically low borrowing costs to finance leveraged buyouts. So how are private equity firms coping with the end of cheap money? To find out, reporters and editors across several PEI Group titles have spent the last few months speaking to dozens of industry participants to get their perspectives.
In this first episode of our five-part podcast miniseries, Private Markets and the End of Cheap Money, we look at how higher interest rates are playing out in private equity transactions and why certain areas of M&A (deals in the mid-market, in particular) may be facing outcomes different from what you might expect.
Mary Kathleen Flynn, editor-in-chief of affiliate title PE Hub, spoke with a wide range of dealmakers, including private equity firm leaders, lenders and investment bankers, about the impact of high interest rates and other factors like high inflation on private equity-backed transactions.
Featured in this episode: Norm Alpert, founding partner at Vestar Capital Partners; Greg Belinfanti, senior managing director of One Equity Partners; Marc Leder, co-founder and co-CEO of Sun Capital Partners; Ignacio Jayanti, CEO of Corsair Capital; Milwood Hobbs Jr, managing director and head of North American sourcing and origination at Oaktree; Michelle Handy, managing director and head of portfolio and underwriting of First Eagle Alternative Credit’s direct lending platform; and Peg Jackson, managing director, software, internet and digital media at Stifel.
In the episodes to come, we’ll speak to LPs about the changes to their portfolio allocations. We’ll ask whether the “L” in LBO becoming more expensive means private credit becomes a more attractive asset class to investors. We’ll look at how private markets professionals in different parts of the world are navigating this new environment. And we’ll learn about some of the key indicators that industry professionals monitor in these uncertain times.