Private equity dealmakers are reacting to the US Federal Reserve's decision to raise interest rates by a quarter point to 4 percent, the first increase since July 2023. The move, driven by inflation and Middle East conflict-related oil price surges, has prompted PE Hub to gather insights from industry leaders. While most agree the hike affects the exit climate, opinions vary on its impact on dealmaking. Jason Cohen of Portage Point Partners notes that higher rates have already limited leverage and elongated sale processes, forcing firms to focus on operational improvements. Howard Gutman of Highspring calls the cost increase marginal, emphasizing that the exit environment remains the bigger challenge. Mark Radzik of Granite Creek Capital Partners believes the lower middle market will be less affected, as returns rely more on growth than leverage. Kevin Tom of Skyline Investors states their strategy is largely debt-independent, while Kevin Mulligan of Monomoy Capital Partners highlights that higher rates make leverage less viable, shifting focus to EBITDA growth and operational value creation.
Source: PE Hub · Summarized by HeadlinesBriefing