Higher interest rates and evolving market conditions have fundamentally altered private equity deal-making. Bain Capital’s 2026 global private equity report signifies that “12 is the new five,” suggesting that today’s deals now require a faster EBITDA expansion than in the past. • State Street SPDR S&P 500 ETF Trust stock is showing positive momentum. What’s next for SPY stock? Delivering that level of performance calls for a more disciplined value creation strategy and a data-driven competitive advantage, the report continued. In 2015, firms could rely on cheaper debt and rising valuations, needing five percent annual EBITDA growth to see a 2. 5x return. Today, with borrowing costs higher, lower leverage and a lack of multiple growth, deals require roughly 10 to 12 percent annual EBITDA growth to see a 2. 5x return over five years. “Gone is the glorious time in the 2010s when everybody was generating and distributing capital at a record pace. These days, LPs have narrowed their focus to the largest platforms and the top-tier alpha generators while the majority of firms wrestle with smaller closes, longer cycles and more noes than yeses,” the report stated. As a result, LPs are focusing on other areas of the market such as private credit, special situations, asset-backed finance, infrastructure, real estate, secondaries and semiliquid and evergreen vehicles. The average holding period for a private equity company is around seven years, making the fundraising environment “a major challenge” for general partners (GPs). The private equity industry is sitting with 32, 000 unsold companies worth $3. 8 trillion, the report stated. “Many GPs appear to be holding assets for longer in order to buy time for strategies to increase EBITDA. But eventually that comes at a cost,” the report said. An analysis of buyout vintages from 2000 to 2015 indicates that internal rates of return (IRR) tend to plateau around the seventh year and decline thereafter. Continuation vehicles are “easing some of the pressure GPs feel to monetize assets,” but these account for less than 10 percent of exit value today and are not a long-term solution to the industry’s liquidity crunch. Despite this, 2026 looks “promising,” as the interest rate environment is easing, the deal pipeline is flowing, coupled with a more robust public offering market. The majority of GPs expect to complete more exits and rely less on other liquidity mechanisms to generate distributions. “If history is any guide, private equity will find a new path to growth and strong returns it always does. This period has presented a series of unique challenges. But there’s no reason to believe we aren’t already on the upswing,” the report said. Photo: Shutterstock.
https://www.benzinga.com/markets/private-markets/26/02/50803412/bain-capital-12-is-the-new-5-pe-faces-higher-hurdles?utm_content=taxonomy_rss
Bain Capital: “12 Is The New 5” PE Faces Higher Hurdles
