Tikehau Capital Chairman Antoine Flamarion stated that inflation is currently impacting their portfolio, a sentiment he expressed at the IPEM Paris 2023 private equity conference. This financial pressure has led the firm to proactively invest "massively in the energy transition" early on to mitigate the effects. Flamarion's comments highlight the broader challenges faced by the private equity industry due to rising inflation and increased interest rates.
The current economic climate, characterized by higher financing costs, is influencing dealmaking strategies. Dealmakers are resuming their pursuit of records after a summer break, yet the nature of transactions is shifting. Private equity sponsors are increasingly employing a "buy-and-build" strategy, particularly in Europe, where add-on deals reached a decade-high of 57.7% of total European PE deal count in H1 2026, according to PitchBook. This approach helps consolidate platforms and enhances exit opportunities in a stalled exit market, as explained by Richard Damming, head of PE investments Europe at Schroders Capital.
The surge in buyout debt, with over $138 billion set to enter US and European credit markets, further underscores the dynamic financial landscape. This volume represents the highest in the US since 2007 and in Europe since 2021. Despite these large debt volumes, the trend towards smaller, more strategic transactions reflects a cautious approach in the face of economic uncertainties, including high interest rates and inflation, which continue to challenge the private equity sector.
