00:00Deal-making around the world may be up 32% in 2026 from the same time a year ago,
00:05but it's not thanks to private equity.
00:08Scarlett Fu has more on how the lull in this corner of deal-making is frustrating investors.
00:13Scarlett?
00:13That's right. You can blame it on elevated interest rates, market uncertainty, and fears of AI disruption.
00:19This backdrop is making it hard for PE firms to exit portfolio companies that they acquired
00:24at lofty prices back when rates were super low.
00:27And funds that were supposed to return capital and wind down by a certain date,
00:31they're staying alive longer than they had planned.
00:33Now, according to one survey, the majority of investors in PE funds, known as limited partners or LPs,
00:39they now expect these so-called zombie funds to multiply in the coming years.
00:43That is up from roughly a quarter of LPs who anticipated this just two years ago.
00:48And that's left LPs in a bit of a dilemma.
00:51Do they push for reduced management fees or do they press for changes to the fund's terms
00:55that would encourage firms to sell investments sooner?
00:59One solution is a continuation vehicle, and that is where a PE firm creates a new fund with fresh capital
01:05and moves the trapped companies into it.
01:07Existing LPs can then choose to cash out or roll their investment into this new fund.
01:12The survey, by the way, finds that two-fifths of LPs expect increased use of these continuation vehicles
01:17even when traditional exits pick up once again.
Comments