Private equity firms facing stalled exits and mounting pressure to return capital to investors are increasingly turning to a new form of stopgap financing: “dequity” — a hybrid of debt and equity offered by direct lenders, Bloomberg reports.
Firms like KKR & Co., Ares Management Corp., and Neuberger Berman have collectively launched more than $30 billion in dequity funds since 2023, according to data compiled by Preqin and reported by Bloomberg. This financing model is gaining traction as private equity sponsors find themselves holding onto portfolio companies longer than planned, due to higher interest rates and unpredictable trade policies making it harder to sell assets or go public.
Recent high-profile deals underscore the trend. Consumer Cellular restructured with $525 million in preferred equity to pay a dividend to GTCR, its PE owner. Insurance broker Acrisure raised $2.1 billion through a convertible preferred stock deal led by Bain Capital. And Norwegian classifieds firm Adevinta is in line for a major private credit injection backed by Blackstone and Permira.
With as much as $3.2 trillion in unsold private equity assets globally, according to a 2024 Bain report, the appetite for liquidity solutions like dequity is only expected to grow.
