Becker Private Equity & Business Podcast
Private Equity Trends: Exits, Capital Calls, and Market Uncertainty with Rick Kes of RSM 3-4-25
Tue, 04 Mar 2025
In this episode, Richard Kes, Partner at RSM, discusses the rise of internal fund-to-fund exits, the return of capital calls, and how market conditions—particularly interest rates and tariffs—are shaping investment strategies.
Chapter 1: What are the current trends in private equity exits?
This is Scott Becker with the Becker Private Equity in Business podcast. I'm thrilled today to be joined by Rick Kess. Rick is a brilliant leader and partner from RSM. He joins us regularly. Rick, we're going to talk today a little bit about the private equity world and what you're seeing.
I think the most fascinating thing that I'm seeing are two things that I'll sort of use as almost personal anecdotes into the market and get your sense of this. The first thing is, I'm an investor in one fund, I'm an LP, and that LP just announced one of your exits, and the exit is something that we're seeing more and more of.
It's an exit of a company who's selling into another company owned by another fund in that family under that same sponsor. So more and more people finding ways to do exits that are sort of non-traditional, and it might just be circumstance, but it might be a way to get the exit of that fund, get something going in the next fund. But that's one topic.
The second thing is starting to see as a limited partner, capital calls again. I wanted to get your sense of what are you seeing out there in the exit environment? What are you seeing out there in the putting money to work environment? What are you seeing out there?
Chapter 2: How are capital calls returning in the market?
Yeah, Scott, I think in some sense, the overall market conditions that we're seeing, I would think, people are getting a little bit more, I guess, understanding of the interest rate environment and understanding of the fact that there's a lot of things that may or may not be you know, beneficial to the lowering of the interest rates.
So I think some people are almost putting that aside and saying, okay, well, you know, we can't do much about this, right? And so we need to do something. And, you know, perhaps to your point, you know, it's selling within the same fund family. That could be one idea.
Chapter 3: What is the impact of interest rates on investment strategies?
And to your point, the other idea is just moving on and figuring out what exits can happen and what activity could happen, even absent the interest rate environment. Because obviously, there's some noise. suggesting inflation still maybe not yet to where the Fed would like it to be.
I think some data came out late last week that showed personal consumption around 2.5%, which I think the target's around 2%. So that could be a little bit of a headwind against lowering interest rates. And then, of course, you know, I think there was some data from a manufacturing perspective around manufacturing purchasing up about, you know,
14, 15% because of tariff and tariff-related price adjustments. And so I think because of those two things, we may not see the interest rate environment be as favorable as we would have hoped absent those two data points and other data points, obviously, to that impact. So I think because of that, you know, funds are just obviously reacting and saying, we got to do something.
Let's move forward and move on and, you know, make something work.
Chapter 4: How are tariffs affecting the market conditions?
Thank you. And there's a fascinating point you just made because we're talking today. It's Monday, March 3rd. It's a day where the markets are down because at least they're pointing to the fact that President Trump is going to hit with some more tariffs that will start tomorrow. And what you just said was a fascinating microcosm of what's going on. The markets don't love the tariffs.
But what you also said is that manufacturing is up some in this country. And I remember talking to a close friend from Indiana not long ago who owns some manufacturing plants. And they're also getting those going if they could staff them again, in part because they've got to be manufacturing goods here, not overseas. So you've got this very complicated world that we live in.
where many of us don't love the tariffs because they're causing some trouble in the stock market and can lead to more inflation. And at the same time, they're having some of that effect that President Trump wants them to have, which is leading some more manufacturing back to the United States.
So, I mean, all these things seem to be so complicated in terms of the different conflicting efforts and purposes of them. And I know you can't talk politics, but I thought that's fascinating what you just mentioned on the manufacturing side.
Chapter 5: What challenges are manufacturers facing today?
Yeah, I think to your point, Scott, it just goes to show that you pull one lever, one thing happens that you might see immediately, but other impacts happen kind of ancillary to that lever. And so I think nothing happens in a vacuum in reality in the global economy that we live in.
And I think to your point, you would like to think perhaps you could say that there's a push for every pull or a pull for every push, but- there could be multiples of that in any direction.
And so you don't really know, you know, the ultimate impact to global GDP or the U S GDP of any certain thing, whether it's tariffs or inflation or jobs reports or anything like that, until you get the chance to look back and kind of study it. And unfortunately, most of us can't wait for the data to kind of realize itself to the point where we can make those perfect, you know,
assumptions and ideas and react in the way that we would if we had all the information available we have to kind of react in the real time and and make decisions and and move forward and put like you said put money to work i mean there's you know again and there continues to be a lot of money on the sideline and a lot of opportunity for activity and i think some of us are just thinking at some point
we're just going to have to move forward because if we're just going to wait for interest rates to go down or wait for this or that to happen, we may be waiting for longer than we really have afforded to us.
No, I think that's exactly right. It's really, really fascinating because for every action, there are a lot of consequences, some anticipated, some not anticipated. And it is fascinating to watch that and then try and judge what to do based on that. And really just so fascinating. Rick, I want to thank you as always for joining us. You know, funds starting to put money to work again.
Other funds trying to find ways to exit. Some of those being internal and side by side exits versus what we think was real exits. But I guess they count as long as the investors getting their money back. I don't know if it's sustainable or not. You can't keep on selling money.
When I see funds sell their own funds and sell their own funds on their own funds, sometimes I think of it as one of the world's great Ponzi schemes. No offense to anybody. I know that'll piss somebody off, but that can't go on forever. So ultimately, they better find some other people to sell to as well. In any event, Rick Kess, always fantastic to visit with you.
Thank you for joining us on the Becker Private Equity and Business Podcast. Thank you very, very much.
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