Private Equity's Clever Trick to Beat the Slump

Private equity firms are facing a unique challenge. Their typical strategy of buying, improving, and selling companies for a profit is being hindered by a tough market.

The Current Situation

• High Interest Rates: Borrowing money for deals has become expensive.
• Few Buyers: It's tough to find buyers for the companies they own.

The Clever Trick

To keep the numbers looking good, private equity firms are resorting to an unusual tactic: selling companies to themselves.

"It's like moving money from one pocket to another."

This temporary fix allows them to show a profit on paper and wait for better times.

A Case in Point

Clearlake Capital recently celebrated their success with a big party, complete with champagne and shrimp. However, their secret to success was selling companies within their own funds.

The Bigger Picture

• Unsold Companies: There are over 31,000 companies sitting unsold, a record high.
• Deal Activity: While there's been a slight pickup in deal activity, it's not enough to make a significant difference.

The Future

This strategy is not a long-term solution. It's merely a way to buy time. For now, it's the game they're playing.