During a recent private equity forum in New York City, operational partners came together and discussed industry concerns at length, including a particularly pressing hot topic. PE fund competition is fierce — and that's skewing the way EBITDA affects returns and heavily influencing what it takes to come out ahead at an investment's exit point.
Industry data research center Preqin reports that private equity managers have raised approximately $260 billion so far in 2017. This amount is predicted to surpass $369 billion by end of year, breaking the PE fundraising record set in 2007. The recent flood of money flowing into PE funds is driving up purchase prices to a point that renders superior returns much harder to achieve — and strong EBITDA growth in and of itself is no longer sufficient for success.