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Do PEs offer singing bonus or relocation fee?
What free PE news sites/blogs do y’all follow
Salary range for IR Sr. associate at $10B+ fund?
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Hard to answer in the allotted characters. Short answer is you can’t reasonably expect things to go well forever and most deals have significant leverage. PE is also IRR driven. Hard to hit hurdle rate if you hold 10 years vs 5. Also sell portcos to align with fund cycles and need to return money to LPs. Returns can only be realized once you sell. There’s many reasons involved but selling all comes down to returns and timing.
It's all about returning money to their investors. They raise funds with target returns and schedules to return capital and selling portcos is how they get the money to return.
Because they have to return capital to investors in their funds and the cashflow from operations are (likely) nowhere near lucrative enough compared to the proceeds from sale. They wouldn’t hit the advertised IRR numbers from holding the profitable PortCo’s alone. Every year longer they wait, the worse the initial return too due to the WACC.
Selling a business (now) at 8-15x EBITDA is probably at least 10-20x this year’s cashflow. Thats 10-20 years of capital in their pocket today, when future years cashflows are discounted and worth less anyway.
Basically its just way more lucrative to sell. And there are bigger fish with way more capital to deploy to hold the PortCo at it’s next stage of growth.
A) It’s two-fold. Firstly investors want their money back at some point, typically 7-10 years after investing in a fund.
Secondly, it’s a capital allocation question - what is the best use of money at a given time? Usually, it’s selling and recycling that money. If I have a business that gives me $1/yr, I would rather sell it for 10x today to give me $10 today and then reinvest it to 2x over 5 years (usually the minimum acceptable return for big funds) to get it to $20-40 over 10 years. Re-investing the $10 in other companies might make it flow to the highest return option available vs just what options you have to re-invest the $1/yr cash flow.
B) I think most people would like to sell to a strategic if possible because they can pay more. But in the absence of that, it’s just that there are so many more PE buyers that it’s easy to precipitate a sale when you need it (5-7yrs into your hold period)
PE buyers may also need to deploy capital (raised 10bn fund, you need to deploy soon to give yourself time to realize returns and buffers). PE sellers are a ready source
Implicitly, when you raise a fund, you tell investors I will find and am capable of finding great investments. You call the capital, keeping your promise to investors, while earning fees and putting your talent (IPs, Ops team) to work
Following. Curious about this as well.
Vanguard, blackrock, and state street buy and hold public companies like you’re thinking of. Firms that raise funds with specific vintage have to return capital to investors