Last year was bad for private equity. 2016 isn't shaping up to be any better.
Private equity firms' shares have underperformed market benchmarks to begin the year as investors price in recession fears and the rising cost of credit for deals.
Leveraged buyout firms did a paltry 116 deals globally in January, according to data from Dealogic, which tracks and analyzes mergers and acquisitions. It's less M&A by volume than the industry has done in the month of January in more than a decade. The $5.15 billion in value of deals private equity did last month is the least investors have spent in a January since 2009, when global credit markets were still slow in the wake of the global financial crisis.
"It's the credit markets," said Kenneth Leon, equity analyst from S&P Capital IQ. "When they seize up, you can't get deals done."
Exits — the sales of companies owned by private equity firms that mark a successful deal — are also down. In the wake of the initial public offering window slamming shut to begin the year, this shouldn't be a shocker anywhere on Wall Street.