Private Equity Deal Terms Shift as LPs Demand Cash Returns

Limited partners are pushing private equity firms for cash rather than paper valuations, which is shaping deal terms such as continuation funds, minority recaps, and sales to strategic buyers. The article notes weak distribution rates for recent buyout and venture funds and discusses how those pressures affect legal documents. It also mentions renewed acceleration in public software and a hot inflation report that could influence rate expectations.

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Private equity controls roughly 13,500 U.S. companies, with about one-third held longer than five years. Recent buyout funds from 2021 have returned only about 14 cents per dollar, while comparable venture funds have returned about 5 cents, the weakest early result since 1997. Distributions have stayed under 15% of net asset value for four straight years, and secondaries hit a record $121 billion in the first half. Fewer than 5% of LPs are rolling into continuation funds.

Public software shows renewed momentum: 46% of companies are growing faster than a year earlier, up from 22% in December 2023, though below the 2021 peak of 68%. Among firms above $50 billion in market value, 77% are accelerating. A hot inflation reading has revived talk of an October rate increase.

Count words. First paragraph: Private(1) equity2 controls3 roughly4 13,5005 U.S.6 companies,7 with8 about9 one-third10 held11 longer12 than13 five14 years.15 Recent16 buyout17 funds18 from19 2021 20 have21 returned22 only23 about24 14 25 cents26 per27 dollar,28 while29 comparable30 venture31 funds32 have33 returned34 about35 5 36 cents,37 the38 weakest39 early40 result41 since42 1997.43 Distributions44 have45 stayed46 under47 15%48 of49 net50 asset51 value52 for53 four54 straight55 years,56 and57 secondaries58 hit59 a60 record61 $12162 billion63 in64 the65 first66 half.67 Fewer68 than69 5%70 of71 LPs72 are73 rolling74 into75 continuation76 funds.77

Second: Public1 software2 shows3 renewed4 momentum:5