Private Equity Apocalypse Only the Strongest Survive

• Private equity firms are experiencing low payouts, with nearly $3.8 trillion in unsold companies.
• Fundraising is becoming increasingly concentrated among established brands, leaving smaller firms struggling.
• The traditional playbook of leverage and valuation multiples is no longer sufficient for generating returns.
• Industry experts predict consolidation and the potential extinction of weaker players.

A Cold Day in the Netherrealm for Private Equity

As Scorpion, I've seen my share of brutal battles and fiery demises. But even the Netherrealm seems less unforgiving than the current state of private equity. According to reports, the industry is grappling with falling returns, unsold companies, and fundraising nightmares. It appears only the strongest will survive this tournament, while the rest face a fate worse than a spear to the chest.

Get Over Here...If You Can Raise Capital

Fundraising, it seems, has become a deadly game of 'get over here,' but only for the established players. Smaller and emerging managers are struggling to secure commitments, while the big boys continue to feast. It's a stark reminder that in this world, as in Mortal Kombat, power and reputation reign supreme. Much like the Senate Democrats seeking remedies for Trump's Tariff Debacle Senate Dems Seek $175 Billion Refund, some funds are hoping for a bailout, but the market may not be so forgiving.

Toasty No More The End of Easy Money

The days of easy money and cheap debt are gone, leaving many firms exposed. The traditional playbook of leverage and increasing valuation multiples is no longer enough. Now, fund managers must prove they can actually add operational value, not just rely on financial wizardry. It's like expecting a Sub-Zero to start breathing fire – some things just aren't sustainable.

Flawless Extinction Consolidation or Oblivion

Industry leaders are predicting consolidation as performance gaps widen and capital becomes more concentrated. There are apparently more PE funds than McDonald's outlets in the U.S. Clearly, a shakeout is in order. Some firms will be absorbed, while others face extinction. As Romain Bégramian put it, "Going extinct definitely is going to happen for some of them." It's a Darwinian selection, and only the fittest will survive.

The Rise of the "Zombified" Assets

Lucinda Guthrie highlights a growing trend of "zombified" assets, where funds sit on a backlog of unrealized exits and struggle to raise fresh capital. Instead of selling at lower valuations, some managers are shifting assets into continuation vehicles, buying time but not necessarily solving the underlying problem. It's like trying to resurrect the dead – sometimes, it's better to let things rest in peace.

"12 is the New 5" Adapt or Perish

Bain & Company calls this shift "12 is the new 5" – a shift from about 5% growth in annual earnings to now closer to 10% to 12% to generate the same returns. Firms must adapt to this new reality or face the consequences. In the world of private equity, as in the Netherrealm, you must evolve to survive. Get over here and adapt or face my wrath, and the market's.