Evidence of the difficult conditions facing the private equity industry has been revealed by TPG in a letter to investors that disclosed that the group had considered 140 leveraged buy-out deals in recent months and agreed to none.
The April letter, obtained by the Financial Times, makes the case that the leveraged buy-out is “an investment structure which is useful at some times during the cycle but not at other times”.
“When debt is mispriced and inexpensive, as was the case before 2008, it makes sense to replace equity with debt, hence the abundance of LBOs,” the letter said.
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