Warning: tsunami of liquidity about to hit private equity

Lazard mid-market CEO cites aging funds and retiring founders

The private equity landscape is about to be hit by a tsunami of liquidity as GPs cash out on their investments and founding partners retire, Lazard middle market chief executive officer David Solomon told the Buyouts Chicago conference on 23 June.

Speaking on a panel, Solomon referred to a “liquidity rush” in the usually illiquid private market prompted by maturing funds and aging founders exiting. This will require a generational transition, he said.

Half of all private equity companies are seven years old and must exit their investments soon, he said. Solomon estimated that if 3,500 companies were sold in the next few years, the number of exits will double.

The wave of liquidity has yet to hit because the equity markets remain buoyant and interest rates are low, Richard Jaffe, partner at Duane Morris told the conference. But the industry is preparing for a tsunami, because all the indicators are there, he said.