Private Equity Faces Historic Reckoning as Fundraising Slowdown Deepens | Weekly Pulse

Must Know: Private Equity Faces Historic Reckoning

Bottom Line: Private equity firms are experiencing their most challenging period in decades, with fundraising targets slashed, deal exits stalled, and some industry veterans predicting many firms won't survive.

Why It Matters: 📊 At current distribution rates, it would take nine years for investors to collect their money from the 12,000+ companies held by US buyout funds. More than 18,000 private capital funds are chasing $3.3 trillion—creating $3 of demand for every $1 of supply.

Big Picture: 🔄 The industry that thrived on cheap money and rising valuations has hit a wall. Quarterly returns plummeted from 13.5% in Q2 2021 to just 0.8% in Q4 2024, forcing firms to explore continuation funds, retail investor products, and alternative exit strategies.

Trends to Watch

• 🤖 AI Infrastructure Buildout - Massive capital requirements driving new financing structures and infrastructure investments

• 📱 Retail Democratization - 401(k) access and evergreen fund structures opening trillion-dollar retail market opportunity

• 🔄 Continuation Fund Evolution - Secondary transactions becoming standard practice as traditional exits remain challenging

• 🌍 Geographic Diversification - Institutional investors shifting allocations toward European and emerging markets

• ⚡ Energy Transition Financing - Private capital increasingly focused on renewable power and data center infrastructure

• 🏥 Healthcare Consolidation - Continued M&A activity in healthcare services and technology sectors

• 📊 Credit Spread Compression - Private credit and traditional lending markets converging on pricing

• 🎯 Fund Size Moderation - Shift toward smaller, more focused funds as mega-fund strategy faces headwinds

Industry Insights: Strategy & Outlook

• 🎯 Sector Convergence: Private and public markets converging as both chase retail investor capital, with democratization becoming a "megatrend for the next 10 years"

• 🏗️ Infrastructure Opportunity: AI-driven demand creating $7 trillion capital deployment opportunity, with half going to compute and semiconductor manufacturing

• 📈 Credit Market Evolution: Private credit CLOs rapidly gaining market share, expected to comprise 25% of private credit market by 2027, up from 18% in 2024

• 🌐 Geographic Shift: European private markets seeing increased allocation from institutions seeking diversification away from US concentration

• 💡 Innovation Focus: Continuation funds and secondary markets becoming permanent fixtures rather than temporary solutions to liquidity challenges

• ⚖️ Regulatory Response: Global regulators implementing stricter oversight of private credit sector, particularly around retail investor protection

Deal Spotlight: Transactions & Strategies

• 💻 Electronic Arts - $50 billion take-private talks with Silver Lake, Saudi PIF, and Affinity Partners

• 🏥 Patient Square Capital - $2.6 billion acquisition of Premier Inc. healthcare solutions provider

• 🏒 New England Patriots - Sixth Street Partners acquiring 3% stake at $9+ billion valuation

• ⚕️ Ethypharm - PAI Partners exploring €1+ billion sale of French pain/addiction treatment specialist

• 🦷 Dentalcorp - GTCR acquiring Canadian dental network for C$2.2 billion

• 💊 PROS Holdings - Thoma Bravo buying software company for $1.4 billion at 42% premium

• 🏗️ Sempra Infrastructure - KKR and CPPIB acquiring 45% stake for $10 billion

• 🔧 Sebia Diagnostics - Blackstone, Warburg Pincus among bidders for €5 billion French diagnostics provider

• 🛩️ Trans Maldivian Airways - Blackstone's repurchase bid collapsed over pricing disagreements

• 🏢 Squarespace - $2.65 billion refinancing at one of lowest private debt spreads ever recorded

• 🎮 AppZen - Riverwood Capital investing $180 million in AI-powered expense management platform

• 🔍 Intelligo - Carrick Capital acquiring majority stake in background-check provider

Fundraising Focus: Capital Formation

• 🎯 Ridgemont Equity Partners V - Closed at $3.975 billion upper limit, surpassing $2.75 billion target in four months

• 🌍 Apollo Global Management - Rolling out three new private capital funds for wealthy European investors with €10,000 minimum investments

• 🏗️ Ares Management - Targeting $8+ billion for data center investments across London, Japan, and Brazil

• 💰 Gramercy Funds Management - Collected $760 million for fourth private credit fund targeting $1.5 billion

• 🎪 Underdog Global Partners - New sports-focused PE firm launching with existing sports and media assets

• 🇪🇺 Deutsche Bank - Launching private markets fund with DWS and Partners Group for wealthy European clients

• 🎯 Brookfield Buyout Unit - CEO aims to triple fee-bearing assets to $129 billion over next five years despite challenging environment

• 📊 Private Credit CLOs - $30 billion issued in 2025, tracking toward $50 billion record annual volume

Market Spotlight: Regional Developments

• 🇺🇸 United States: Federal Reserve rate cuts providing modest relief to PE dealmaking, though tariff concerns continue to create uncertainty

• 🇪🇺 Europe: Private credit expansion accelerating with ELTIF 2.0 regulations making alternative assets more accessible to wealthy individuals

• 🇦🇺 Australia: ASIC implementing stricter standards for A$200 billion private credit sector, with nearly half concentrated in higher-risk real estate development

• 🇦🇪 Middle East: Increased participation in global deals, with Saudi PIF backing major transactions including potential Electronic Arts buyout

• 🇨🇳 Asia-Pacific: Severe fundraising challenges with only 10% of 2021 levels, though China seeing 41% surge in CSI 300 over past 12 months

• 🇬🇧 United Kingdom: Petershill Partners delisting from London Stock Exchange highlights broader struggles in public investment trust sector

• 🇨🇦 Canada: Rogers Communications weighing IPO versus private capital for sports empire worth over C$20 billion