Which top-tier fund do you guess will go bust in the current cycle (or at least miss hurdle)?
Apollo? (There was an article in barrons about how many of Apollo's investments
are under water (linen n things, realogy))
KKR? (a bunch of megadeals in last year)
Silverlake? (if tech LBOs prove more cyclical than thought?)
| +196 | PE Recruiting Prep Guide - 2024 | 22 | 1h | |
| +67 | No hispanics in PE | 36 | 9h | |
| +29 | Is Thoma Bravo fucked? | 17 | 2d | |
| +28 | MF PE Analyst Programs Ranked | 22 | 1h | |
| +24 | MS M&A/MC/Menlo vs MF PE Analyst | 27 | 5d | |
| +20 | PE and Balance Sheet Heavy Businesses | 6 | 4h | |
| +18 | Down after rejection | 8 | 3d | |
| +16 | Leverage Lateral BB Offer to Speed Up Buyside Processes? | 5 | 18h | |
| +16 | Is PE worth it? | 11 | 4h | |
| +15 | How to participate in on-cycle before start date / away from NYC | 7 | 4d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
Warburg Pincus is the likeliest. They're betting 0.5-1B that MBIA, a bond insurer does well.
A hedgefund is shorting it like a mother f****.
MBIA already lost half it's stock value....
As for KKR, I'd say they have the same longevity as GS, regardless of what happens (aside from a depression).
has the most amount of capital tied up in the fewest deals (but not necessarily the riskiest). Cerb and Apollo have the most visible and worst performing investments currently, but they don't necessarily make up a huge chunk of their portfolios. I personally believe KKR would be most at risk for a fallout, especially if FDC and Alliance Boots go bust (I don't think this is likely right now, although equity is effectively underwater currently--theoretically). I also definitely do not believe KKR would get the support that the above poster indicates if their IRRs plummeted dramatically, especially with Kravis/Roberts probably in the last decade of their careers. While KKR does have huge institutional support, there are just too many options currently for endowments/pension funds to allocate capital if they begin to loose faith in the investment prowess of the firm.
Also, Warburg isn't going bust, that's ridiculous. They can write off the whole 500-1bn investment and would still make it. They do too much VC/growth capital and their deals are too spread out. Pershing Square (Ackmann) is shorting the monolines and doing quite well obviously (although TGT/Borders investments are suspect)
From the reports I've read Warburg would definitely be in a very bad situation if the stock compeltely fell off.
that I am saying is that a 500mm writeoff (1bn worst case if they exercise options), while bad, will not kill an 8bn fund that is otherwise performing ok in its other investments. They will just look stupid (and they will once the company is downgraded and goes under)
8bn? My bad in that case. I kept seeing their figures around 4bn, so with that number, a 25% loss would've been a serious hit.
I just posted this on another thread, but I think it's relevant. You can look at companies owned by certain PE firms and predict which ones are screwed (as most posts above do), but if you take an "expertise" focus, maybe this would be a better way to look at things? It seems unlikely to me that any of the firms above "goes bust" in the next 5 years, even, but the ones that are best equipped to use the economic situation at play to their advantage the best are likely to come out on top 5 years down the road--or, put another way, least likely to "go bust" in the sense of having subpar returns relative to their peers...
Yeah, the role that cap mkts play shouldn't be understated...given that the company a PE firm buys has to have strong enough cashflow to pay off debt, all the KKRs of the world care about is what the starting and ending price of their acquisition is (along with years the acquisition is held, too, obviously). Debt and equity markets combined determine how "expensive" an acquisition is for a given level of EBITDA and growth (with an emphasis on debt--so that's why July/Aug hurt acquisitions)--how cheap can you buy a company and how much will it cost you to hold onto a sliver of the firm--and equity markets determine how much is made on the exit (which is why equity markets dropping 15% since October hurts the other end of the pipeline). So today, two things will be major contributors to PE firms' success/failure in the coming months/years: creative financing will determine their ability to purchase companies that they see as undervalued without being killed by debt (see Warburg's recent deal for Lifecore); and operational expertise will allow them effectively grow companies in their portfolios, likely holding them longer than expected so that they can be sold for higher multiples 2-3 years down the road. If we enter a recession (seems likely enough), the PE firms that know more than just how to get a deal through the pipeline and profit off of levering from cheap debt (from my highly biased background as a soon-to-be Bain alum, the Bains, Golden Gates, Berkshires, TH Lees etc.--firms that hire a decent proportion of management consultants--as well as the Cerberuses, Apollos, etc.--firms that have played the "vulture" role before--of the world stand to weather the current economic state best, in my mind...
Id magnam error animi facere inventore unde esse. Consectetur voluptatibus itaque animi ut ut repudiandae maxime. Numquam consectetur dicta vel quibusdam enim quod.
Distinctio eaque odit ut qui magni enim quis. Et non blanditiis ab asperiores rerum eos vitae. Temporibus non labore facilis impedit et dolor porro. Architecto est tenetur quis qui beatae consequuntur. Sit magnam perspiciatis nesciunt. Perspiciatis hic voluptatum esse. Provident quis ut voluptatibus modi non.
Tenetur libero at et soluta. Et itaque provident tenetur blanditiis fugiat vero autem. Atque cupiditate consequatur sunt facere quibusdam. Ut ad cum officia culpa explicabo qui. Vitae occaecati quas itaque debitis qui possimus.
Illum eos odit adipisci dignissimos cupiditate libero et. Placeat et qui enim ut veritatis id vitae. Excepturi aut sed sed fugit quas praesentium. Ipsam amet impedit magnam sed.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...