McKinsey April 12, 2024
Amid a slower deal environment, private equity buyout managers can adapt their approach to value creation—and, as a first step, emphasize improvements to operational efficiency.
For the past 40 years or so, private equity (PE) buyout managers largely invested capital in an environment of declining interest rates and escalating asset prices. During that period, they were able to rely on financial leverage, enhanced tax and debt structures, and increasing valuations on high-quality assets to generate outsize returns for investors and create value.
Times have changed, however. Since 2020, the cost of debt has increased and liquidity in debt markets is harder to access given current interest rates, asset valuations, and typical bank borrowing standards. Fund performance has suffered as a...
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