Private equity sales have fallen by more than a third this year, as developments in artificial intelligence and war in Iran heap pressure on a subdued exit market. Buyout firms were sellers in deals valued at about $103 billion in the first quarter, data compiled by Bloomberg show. Though still above historical averages, the figure is roughly 36% lower than the same period a year ago and stands ou...
Private equity sales have fallen by more than a third this year, as developments in artificial intelligence and war in Iran heap pressure on a subdued exit market. Buyout firms were sellers in deals valued at about $103 billion in the first quarter, data compiled by Bloomberg show. Though still above historical averages, the figure is roughly 36% lower than the same period a year ago and stands out in an M&A market flush with megadeals. It’s a blow for private equity firms eager to shift a backlog of portfolio companies, return money to impatient investors and start fundraising. High valuations paid during the pandemic are limiting firms’ ability to sell companies at prices they find acceptable, crimping their capacity to find new deals and to transact with one another. “The end of Q1, start of Q2 is a critical juncture when it comes to pipeline building,” said Na Wei , global head of leverage finance at Barclays Plc . “There is no doubt the market is seeing an impact on sponsor to sponsor activities.” In the meantime, firms are seeking ways to hold on to hard-to-shift assets while also paying themselves and their investors. A recent report by Moody’s Ratings found that private equity-owned companies borrowed $94 billion in the US to fund their own dividend payouts last year, increasing risk to those businesses. Sid Punshi , head of financial sponsors coverage in Europe, the Middle East and Africa at Citigroup Inc. , is seeing more minority stake sales and continuation vehicles—structures that give investors a way to cash out of assets that can’t be sold within traditional timeframes. “We are seeing funds being more creative on exit solutions, especially at a time when public markets may not be open,” Punshi said. “The market is bifurcating into haves and have-nots.” When more than a decade of cheap money ended after the pandemic, buyout firms began struggling to sell some of the companies bought during the boom years. Higher borrowing costs led to valuation gaps, a...
Artificial intelligence (AI) stocks have lost their luster in recent months, which seems surprising given that companies in this sector have been reporting strong growth quarter after quarter. The poor performance of AI stocks explains why the tech-focused Nasdaq Composite index has slipped 11% over the past three months. The war in the Middle East, the rising probability of a recession, and highe...
Artificial intelligence (AI) stocks have lost their luster in recent months, which seems surprising given that companies in this sector have been reporting strong growth quarter after quarter. The poor performance of AI stocks explains why the tech-focused Nasdaq Composite index has slipped 11% over the past three months. The war in the Middle East, the rising probability of a recession, and higher fuel prices have dented investor confidence in the stock market this year, and AI stocks have borne the brunt. However, it will be worth looking past the noise. AI companies continue to grow at a terrific pace, driven by heavy infrastructure investments in data centers and by customer adoption of this technology. Also, their valuations are now relatively cheaper due to the sell-off. With AI expected to contribute a whopping $22.3 trillion to the global economy by 2030, according to IDC, I would treat the recent pullback in AI stocks as a buying opportunity. Continue reading
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"Bloomberg: The Asia Trade" brings you everything you need to know to get ahead as the trading day begins in Asia. Bloomberg TV is live from Tokyo and Sydney with Shery Ahn and Haidi Stroud-Watts, getting insight and analysis from newsmakers and industry leaders on the biggest stories shaping global markets. (Source: Bloomberg)