Private equity offers sweeteners as golden age ends
Private equity firms are increasingly offering sweeteners, including fee discounts, to secure backing from deep-pocketed investors.
Blue-chip firms including CVC Capital Partners, Ardian, TPG and Cinven have all in recent months offered investors either a discount on management fees or other incentives such as larger amounts of so-called co-investment, which enables investors to get a bigger slice of individual deals without paying a fee.
Some firms are even offering big backers such as pension plans and sovereign wealth funds a slice of the management fee that usually goes to the fund manager.
Private equity firms are increasingly offering sweeteners, including fee discounts, to secure backing from deep-pocketed investors.
Blue-chip firms including CVC Capital Partners, Ardian, TPG and Cinven have all in recent months offered investors either a discount on management fees or other incentives such as larger amounts of so-called co-investment, which enables investors to get a bigger slice of individual deals without paying a fee.
Some firms are even offering big backers such as pension plans and sovereign wealth funds a slice of the management fee that usually goes to the fund manager.
In the first half of 2023, firms globally raised $517bn, a 35% fall against the same period a year ago, according to a Bain & Co report released in July. The report found that for every $3 of capital firms are trying to raise, investors only have $1 available to allocate to private equity, the worst imbalance since the global financial crisis.
Last week, Marc Rowan, chief executive at Apollo Global Management, warned that the lucrative age for private equity buyouts had ended. He said the $4tn industry could no longer rely on rising valuations to fuel returns.
The FT (£)
