Private equity funds’ exit dilemma

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STILL WAITING: Holy cow. It sure does seem like private equity funds are getting a little antsy.

BURDEN OF $3 TRILLION ASSET PILE
SPARKS HUNT FOR IPO ALTERNATIVE

As the market for initial public offerings bounces back after two lifeless years, investors who’ve been impatiently waiting for their payoff are finally getting some returns.

But the revival hasn’t come fast enough: Behind the scenes, the private equity shops saddled with bulging portfolios—and the banks and exchanges that make millions helping companies go public—are still scrambling to come up with alternative exit strategies.

Some are turning to private sales of shares, while others are establishing new semi-public exchanges to tempt companies to market. Inside at least one buyout firm, executives want to rejig long-accepted investment frameworks to address the new reality.

The reasons: A return to true health in the IPO pipeline could take until next year, and a record $3.2 trillion was tied up in aging, closely held companies at the end of 2023. [Emphasis added.]

Investors just want to get paid, already. I don’t mean to sound like a crank, but for all this talk of “semi-public exchanges” and “alternative exit strategies” as potential solutions, I bet that if the funds could simply sell their holdings at prices anything close to their portfolio marks—which were arrived at in a totally different interest-rate world, remember—all would be well, and things would get unclogged in a hurry. But I have a feeling that won’t happen any time soon.

Oh, and when they say it’s a long line to the exit, they’re not kidding.