Sponsors are starting to capitulate on valuations.
Apollo's co-president said it on the record: PE "lost its way a little bit" — and the reckoning is coming.
Scott Kleinman, co-president of Apollo Global Management, was direct in June: private equity lost its way during the easy-money era, and the reckoning is coming. Longer hold periods are hurting IRRs. Funds raised from 2017 to 2022 are struggling in particular, because they overpaid when financing was cheap and leverage was loose.
What that means for an operating team is straightforward: the sponsor's return expectations have reset downward. The deal math that assumed multiple expansion or leverage payoff no longer exists. The sponsor is now looking entirely at you to build the return.
And the capitulation compounds. Every quarter a company sits unsold, the sponsor's return timeline stretches. Every cohort of deals that underperforms the model teaches sponsors they can't rely on the old thesis. The teams wired to understand that — and to move on it — will be worth more than the ones still waiting for the market.