Becker Private Equity & Business Podcast
Private Equity Funds, Exits & Multiples 3-8-25
Sat, 08 Mar 2025
In this episode, Scott Becker discusses the impact of rising financing costs on private equity exits and valuations.
Chapter 1: What is the main topic of this episode?
This is Scott Becker with the Becker Private Equity and Business Podcast. Today's discussion is private equity funds, exits and multiples. So here's a quick take on this. What you've seen over the last three to four years is the cost of financing go up and thus the multiples that are paid for private equity sponsored deals soften or go down or stay flat at best.
Chapter 2: How are rising financing costs affecting private equity?
This has led to lots of private equity funds with two sets of problems. One, their company's margins that they're invested in are going okay, not great. Bolton's have gotten harder and harder, so there's not been easy growth.
Chapter 3: What challenges do private equity funds face today?
And more so, the big artificial problem is, in the old days, even if that was the case, operations were flat, but you grew a bigger company through Bolton's, or you were doing okay, slight organic growth, you could exit as long as multiples were going up. Now you've got a situation where multiples are not going up. So you've got to actually grow EBITDA to get an increased value for a company.
Chapter 4: Why are multiples not increasing in private equity?
And that's become harder and harder in inflationary times. Somebody asked me in a reader question, when will multiples get better? And at the end of the day, they probably won't really get better until we're at a spot where the cost of debt, the Fed cuts rates and the cost of debt go down.
And that could still be some time because we're still seeing inflation, even though we are seeing a softening job market. So we'll see how this all plays through. In any event, Thank you for listening to the Becker Private Equity and Business Podcast. This question about exits and multiples came from a reader of the Becker Private Equity and Business newsletter.
We always love to entertain reader questions. If you have a suggestion, a thought, please feel free to reach out to Scott Becker at 773-766-5322. And we'd love to address your questions, your thoughts, what you're concerned about. Thank you for listening to the Becker Private Equity and Business Podcast.