PE’s walking dead: The zombie portfolio companies with nowhere to go
Private equity’s zombie problem is hiding in plain sight. Across the US, nearly 4,600 PE-backed companies have been held for five or more years, and GPs are sitting on over $860 billion in buyout NAV in funds older than seven years. The culprit is a cohort of companies acquired at peak multiples in a low-rate environment that no longer exists, now trapped between valuations that sponsors cannot accept and exit markets unwilling to meet them. The mechanisms for delay are well worn and widely used, but with almost half of $1 trillion in sponsor-backed loan maturities concentrated in a two-year window, the market’s capacity to keep deferring is not unlimited.
Across the 2018-2022 vintages, distributions are running materially behind historical norms at equivalent fund ages, reflecting a cohort of aging assets with no clear path to exit.
Written by: Kyle Walters @PitchBook
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