Mergers & Acquisitions
July 27, 2025
PE and You
Is Private Equity A Wolf In Sheep’s Clothing?
by Tyler Durden
Friday, Jul 25, 2025 – 03:45 PM
Authored by Lance Roberts via RealInvestmentAdvce.com,
In July 2007, just before the financial crisis erupted, Citigroup CEO Chuck Prince summed up Wall Street’s dangerous exuberance:
“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”
Eighteen years later, Wall Street is dancing again, and the rhythm feels disturbingly familiar.
Private equity (PE), once a niche strategy reserved for sophisticated endowments and mega-pensions, is being aggressively marketed to everyday investors. It’s creeping into 401(k)s, target-date funds, and retirement accounts under the seductive promise of higher returns and diversification. But for investors who’ve forgotten history, or worse, were never taught it, the risks are mounting.
What Is Private Equity & How We Got Here
Private equity refers to investments in companies not publicly traded on a stock exchange. Instead of buying shares of companies like Apple or Microsoft, private equity firms purchase entire companies, or large stakes in them, using a mix of their own capital and large amounts of borrowed money (leverage).
Once they take control, they often restructure the company, cut costs, increase debt, and aim to “flip” it for a profit within a few years. This can be done by selling it to another company, a PE firm, or publicizing it via an IPO.
The pitch? Higher returns.
The reality? Higher risk and lower transparency.
PE’s ascent began after the 2008 financial crisis when near-zero interest rates pushed institutional investors out of traditional bonds and into “alternatives.” As I’ve written, institutional FOMO (fear of missing out) drove billions into private markets with questionable due diligence. So they turned to alternatives: private equity, private credit, hedge funds, and real estate.
In 2019, Ben Meng, then-CIO of CalPERS (California’s massive public pension fund), epitomized the mentality when he said, “We need private equity, we need more of it, and we need it now.”
And Wall Street delivered.
The results were predictable. With cheap credit abundant, deal volume exploded, topping $3.1 trillion globally in 2021. Valuations were detached from reality. According to McKinsey, buyout multiples surged from 6.5x EBITDA in 2009 to 12x in 2022, nearly doubling in just over a decade. But this boom was built on artificially low interest rates and easy liquidity.
That means PE firms paid twice as much for companies as a decade ago. The reason is simple: They could borrow more cheaply and charge investors higher fees.
However, with rates normalized and liquidity tightening, private equity’s structural weaknesses are surfacing. Therefore, as sophisticated investors become more risk-averse to the deals they take on, Wall Street is turning to a new source of capital: unsophisticated retail investors.
What Makes Private Equity Risky for You
Let’s break down some key concerns the average investor should understand before allocating capital—directly or indirectly—to private equity.
1. Illiquidity Is a Feature, Not a Bug
PE funds lock up investor capital for 7-10 years, sometimes longer, depending on extensions and follow-on investments. This means that investors lose the fundamental flexibility that public markets provide, namely, the ability to liquidate assets in response to life events, market downturns, or better opportunities. For example, if you invested in PE through the COVID-19 market shock, you couldn’t reallocate capital even as public markets sharply corrected and rebounded. This rigid illiquidity is especially dangerous for retirees or individuals who may require access to funds unexpectedly.
2. Opacity Masks Risk
In public markets, pricing is determined every second by the forces of supply and demand, providing price discovery and transparency. However, private equity relies on subjective valuation models that are updated quarterly or less frequently. This allows PE funds to “smooth returns,” creating the illusion of low volatility. For instance, during market sell-offs like 2022, many PE funds reported negligible markdowns while public equities fell double digits. This masks the true underlying risk, potentially misleading investors about the health of their portfolios and delaying the recognition of losses until forced asset sales or fund closures
3. Fees Are Devastatingly High
PE funds follow a “2 and 20” fee structure: a 2% annual management fee plus 20% of profits above a specific hurdle rate. Over a decade-long lock-up, even in mediocre-performing funds, fees can erode a substantial portion of gross returns. For example, on a hypothetical $100,000 investment, you could pay $20,000 in management fees over ten years, excluding performance fees. Compared to passive investment vehicles like S&P 500 ETFs costing 0.03%-0.10% annually, the fee drag in PE is enormous. Academic studies, such as those by Ludovic Phalippou at Oxford, have consistently shown that net returns after fees in PE barely exceed, and often underperform, simple public index strategies.
4. Leverage Amplifies Fragility
Leverage is a double-edged sword in private equity. While it can amplify returns in bull markets, it dramatically increases financial fragility during downturns. PE buyouts frequently involve debt levels of 5-7 times EBITDA, far exceeding leverage ratios typical of public companies. This dependence on cheap debt made sense in a zero-rate world, but is becoming a liability as borrowing costs rise. For instance, companies acquired at peak valuations in 2020-2021 face refinancing risks as interest coverage ratios deteriorate. Reports of loan covenant breaches and distressed sales are already emerging across sectors like healthcare, retail, and infrastructure, previously touted as “safe” plays in the PE world.
But while these issues are important, there are seven “red flags” that signal trouble ahead.
Seven Red Flags That Signal Trouble Ahead
The CFA Institute recently highlighted seven red flags signaling serious trouble brewing in private markets—risks magnified for retirement savers who lack the tools and resources to properly evaluate these risks. For retail investors, each of these red flags represents a significant warning that could impact long-term financial outcomes, especially when embedded within retirement plans like 401(k)s and target-date funds.
1. Declining Deal Quality
With record amounts of capital flowing into private equity, more money is chasing fewer high-quality investment opportunities. This leads to PE firms lowering their standards and investing in weaker companies or more speculative ventures. For retail investors, this means exposure to riskier businesses with less predictable cash flows. For example, during the 2021 SPAC boom, many companies that would have traditionally struggled to access public markets instead found their way into private portfolios, leading to high-profile failures post-acquisition.
The chart below from S&P Global shows the number of private transactions terminated between 2020-2023.
2. Inflated Valuations
PE managers often base valuations on future projections rather than tangible market transactions. As a result, portfolios can appear healthy on paper even when underlying fundamentals are deteriorating. For retail investors, this creates the illusion of stability, where portfolio statements show steady or appreciating values while the true market value could be significantly lower. A prime example occurred during 2022, when public tech stocks corrected sharply, but many PE tech holdings barely adjusted, delaying loss recognition and masking portfolio risk.
To that point, you should realize that most private equity investments (65%) either fail or return the initial investment at best.
Yes, private equity can be very lucrative. Depending on the deal you invest in, it can also be very harmful.
3. Fee Pressures = Riskier Deals
Institutional investors are increasingly pushing back on high fees, which puts pressure on PE firms to maintain profitability. This can lead to riskier behavior, such as over-leveraging or engaging in more aggressive cost-cutting at portfolio companies to boost short-term returns. For retail investors, this translates into an even worse alignment of interests: high fees remain in place, while portfolio risk quietly increases. Worse, retail channels often lack the negotiating power to secure fee reductions, leaving them exposed to premium costs for subpar investments.
4. Frozen Exit Markets
An essential part of private equity returns depends on the ability to sell portfolio companies at a profit. However, the current environment of rising interest rates and lower public market valuations has led to a sharp decline in IPOs and M&A activity. This creates a backlog of unsold assets, commonly referred to as an “exit overhang.” For retail investors, this means delayed distributions, longer-than-expected lock-up periods, and an increased likelihood of forced sales at discounted prices. Recent data from secondary market platforms show private equity interests trading at significant discounts, clear evidence of deteriorating liquidity.
5. Discounted Secondaries
When existing investors seek to exit PE investments early, they often turn to secondary markets. Today, these interests are commonly trading at 20-40% discounts to their stated net asset values (NAVs). This is a stark warning sign: even sophisticated investors are willing to accept steep losses to exit PE positions early. Retail investors, who often lack access to these secondary markets or the liquidity to exit early, are particularly vulnerable to being locked into declining assets with no realistic way out.
6. Rising Borrowing Costs
The foundation of many PE deals is built on cheap debt. With interest rates at multi-decade highs, borrowing costs have surged, eroding profitability across PE portfolios. Companies acquired during 2020-2021 at high multiples are now facing refinancing cliffs, where new debt comes at significantly higher rates. For retail investors, this increases the risk of portfolio companies defaulting or entering distressed restructurings, outcomes that can wipe out equity holders while still rewarding debt financiers higher in the capital structure.
7. Dry Powder FOMO
Private equity firms are sitting on record amounts of unallocated capital, or “dry powder.” While that may sound reassuring, it creates pressure to deploy capital quickly, often leading to questionable investment decisions and inflated deal pricing. For retail investors, this means being funneled into PE funds at the tail-end of a market cycle when managers are most desperate to deploy funds and least disciplined in underwriting. Historically, vintages raised during peak fundraising years, such as 2007 or 2021, have produced the worst returns.
When you see multiple red flags flashing across a sector, it’s time to reassess.
What the Average Investor Should Do
As discussed in “Why Am I So Lucky,” individuals hear tales of how high-net-worth investors (the smart money) own private equity in their allocations. As shown in the chart below from Long Angle, roughly 17% of their allocations are to private equities. These reports don’t generally tell you that their allocation to “private equity” often tends to be their personal businesses. Nonetheless, individual investors frequently see this type of analysis and think they should be replicating that process. But should they?
Before investing in private equity, significant differences must be considered between the vast majority of retail investors and high-net-worth individuals. The underlying risks of private equity investments can define these differences. However, with the right knowledge and proactive steps, investors can avoid the most common pitfalls and protect their long-term financial security.
1. Know What You Own
Start by reviewing your retirement plan allocations, especially if you are invested in a target-date fund or managed account solution. Many of these funds now include allocations to private equity or private credit, often buried deep within the prospectus. Request a detailed holdings report if necessary. For example, some widely used TDFs from major asset managers have added “private market” sleeves that investors are unaware of, effectively exposing them to higher fees and illiquidity.
2. Prioritize Liquidity
Liquidity provides optionality, especially during volatile markets or personal financial emergencies. If your retirement funds are locked up for years, you lose the ability to rebalance, take advantage of market dislocations, or fund unexpected needs. Favor investment options that allow for daily liquidity, such as low-cost index funds and ETFs. Remember, having access to your capital is a risk management tool in itself.
3. Focus on Transparency and Fees
Insist on clear, net-of-fee performance reporting. Avoid products with opaque valuation methodologies or excessive fee layers. As a rule of thumb, compare fees: if a private investment costs 2-3% annually versus 0.10% for an S&P 500 index fund, it must deliver dramatically higher returns to compensate, which few consistently achieve.
4. Stay Simple, Stay Diversified
Decades of evidence show that a well-diversified portfolio of simple, liquid public investments outperforms most complex alternatives after fees and taxes. Don’t be lured by “fancy” strategies with marketing sizzle but structural drawbacks.
Final Thoughts: Don’t Dance Just Because the Music Is Playing
Private equity may have its place in a diversified, institutional portfolio, but even then, it demands scrutiny. For the average investor, the risks are magnified by a lack of transparency, long lock-ups, and a fee structure that often benefits managers more than investors.
Wall Street has a long history of selling the newest shiny object to Main Street just as the trade begins to sour. If the music stops at this private equity party, you don’t want to be the last one still dancing.
When in doubt, stick to the core investing principles: transparency, liquidity, low costs, and discipline. Complex products are often designed to enrich the seller, not the buyer. Safeguard your financial future by keeping your portfolio simple, transparent, and aligned with your long-term goals.
https://www.zerohedge.com/markets/private-equity-wolf-sheeps-clothing
July 23, 2025
More Review for ADNOC & Covestro Deal
EU antitrust regulators resume foreign aid probe into ADNOC’s Covestro deal
By Reuters
July 3, 20251:24 PM EDTUpdated July 3, 2025
- Companies
Covestro AGBRUSSELS, July 3 (Reuters) – EU antitrust regulators have resumed scrutiny of Abu Dhabi state oil giant ADNOC’s 14.7-billion euro ($17.3 billion) acquisition of German chemicals company Covestro (1COVG.DE)
,after the companies provided the information they requested, according to an update on the European Commission website.
The EU competition enforcer, which had temporarily halted its review on May 28, set a new deadline of July 28 for its decision.
The EU’s Foreign Subsidies Regulation takes aim at unfair foreign aid for companies which may have to provide concessions to offset the state support in return for clearance of their deals.
ADNOC had in May secured EU approval for the acquisition under EU merger rules.
($1 = 0.8511 euros)
June 24, 2025
Holcim Spins off North American Business
Holcim completes spin-off of North America business
- Holcim unlocks value with NextGen Growth 2030, via growth-focused capital allocation and value-accretive M&A
- Focused investment in most attractive markets from Latin America and Europe to Australia and North Africa
- Advancing its leadership in sustainable construction with expansion of high-value Building Solutions to drive profitable growth
Holcim today completed its 100% spin-off of Amrize, the partner of choice for North America’s professional builders, through a dividend-in-kind distribution of one (1) Amrize share for every outstanding Holcim share owned as of the close of business on 20 June 2025.
As distinct, independent publicly traded companies, Holcim and Amrize should each benefit from a sharpened strategic and operational focus, with dedicated management teams to capitalize on the unique opportunities in their respective markets.
Miljan Gutovic, CEO: “This is an exciting moment for Holcim and Amrize as we begin a new chapter as independent companies. I thank all employees for contributing to the many remarkable achievements of Holcim including the exceptional execution of the spin-off. We wish Amrize success in the future under the leadership of its Chairman and CEO Jan Jenisch.
“As the leading partner for sustainable construction, Holcim will capitalize on the powerful megatrends shaping the future of construction to unlock significant growth opportunities and create superior value for people, customers and shareholders. Alongside our highly accomplished leadership team and 48,000 colleagues around the world, we are executing our strategy NextGen Growth 2030 as unveiled in March.”
With NextGen Growth 2030, Holcim will leverage its sustainability leadership to deliver profitable growth in Europe, Australia and North Africa, while accelerating growth in Latin America to benefit from strong market fundamentals and industrialization trends. Holcim will grow its addressable markets by expanding in high-value Building Solutions, serving customers across the built-environment, from energy efficient building systems to high-performance concrete. The growth strategy will drive shareholder value with growth-focused capital allocation and value-accretive M&A.
Shares of Amrize will commence trading under the ticker symbol “AMRZ” on the SIX Swiss Exchange at 9:00 a.m. CEST and on the New York Stock Exchange at 9:30 a.m. ET.
About Holcim
Holcim (SWX: HOLN) is the leading partner for sustainable construction with net sales of CHF 16.2 billion1 in 2024, creating value across the built environment from infrastructure and industry to buildings. Headquartered in Zug, Switzerland, Holcim has more than 48,000 employees in 45 attractive markets – across Europe, Latin America and Asia, Middle East & Africa. Holcim offers high-value end-to-end Building Materials and Building Solutions, from foundations and flooring to roofing and walling – powered by premium brands including ECOPlanet, ECOPact, and ECOCycle®.
Learn more about Holcim on www.holcim.com, and by following us on LinkedIn.
Sign up for Holcim’s Building Progress newsletter here.
1 Net sales 2024 restated following spin-off; excludes net sales to Amrize.
About Amrize
Amrize (NYSE: AMRZ) is building North America, as the partner of choice for professional builders with advanced branded solutions from foundation to rooftop. With over 1,000 sites and a highly efficient distribution network, Amrize delivers for customers in every U.S. State and Canadian province. Amrize’s 19,000 teammates uniquely serve every construction market from infrastructure, commercial and residential to new build, repair and refurbishment. Amrize achieved $11.7 billion in revenue in 2024 and is listed on the New York Stock Exchange and the SIX Swiss Exchange. Amrize is ready to build your ambition.
https://www.holcim.com/media/media-releases/holcim-completes-spin-off-of-north-america-business
June 9, 2025
Gougeon Brothers Acquired as Platform
Iron Path Capital Announces Partnership with Gougeon Brothers, Inc. as First Investment in Advanced Materials Platform
Share
Private equity firm to continue building the legacy of family-owned premier epoxy resin formulator and manufacturer
CHARLOTTESVILLE, Va.–(BUSINESS WIRE)–Iron Path Capital, a private equity firm focused on healthcare and specialty industrials, today announced a growth partnership with Gougeon Brothers, Inc., a leading epoxy manufacturer in the composites and marine end markets.
“Gougeon has a long and storied history as a pioneer and innovator in advanced composite epoxy resin systems for both repair and use in original equipment composite parts manufacturing.”Share
“We are delighted to partner with the Gougeon management team to develop and grow their market-leading WEST SYSTEM®, PRO-SET®, and Entropy Resins® epoxy resin systems for making and repairing composite structures,” said Ted Clark, Partner at Iron Path Capital. “Gougeon has a long and storied history as a pioneer and innovator in advanced composite epoxy resin systems for both repair and use in original equipment composite parts manufacturing. We will continue to build the business through organic and inorganic opportunities in the fast-growing composite materials market.”
Family-owned since 1969, Gougeon formulates and manufactures epoxy systems for various applications in the marine, recreational, automotive, aerospace, and industrial composites markets. Gougeon is committed to customer service and technical support in ensuring customers’ effective use of its products in repair and original equipment composite structures. Its in-house chemists develop tailored solutions for each application, ensuring quality and performance through their superior strength and excellent handling characteristics.
The Company’s history is rooted in boat building with the Gougeon brothers pioneering the use of epoxy resin systems in boat construction. In addition to formulating and manufacturing their products, Gougeon is a long-time thought leader in the space and is known for its instructional magazine and online forum (Epoxyworks®), book (The Gougeon Brothers on Boat Construction), and seminars and training sessions including the popular “Glue U” seminar for boat repair.
“The Gougeon Family and the employees of Gougeon Brothers Inc. are thrilled to partner with the team at Iron Path Capital,” said Gougeon CEO Alan Gurski*. “We chose Iron Path as they share our entrepreneurial spirit, and our commitment to each other, our community, our customers, and to manufacturing the finest products for our markets. We look forward to being a part of the next evolution of GBI.”
Ted Clark will serve as Executive Chairman of Gougeon as part of the new advanced materials platform. Clark is an experienced operator in formulated coatings, adhesives and sealants as well as in composites. He previously led Royal Adhesives & Sealants as President and CEO from 2003-2017, which was acquired by H.B. Fuller. Post-acquisition, Clark served as Senior Vice President, Royal Adhesives, then as Executive Vice President and COO of H.B. Fuller before joining Iron Path Capital as a Partner in 2022. Earlier in his career, Mr. Clark also served as President and CEO of PRC-DeSoto International, a producer of coatings and sealants for aircraft.
This marks the fifth platform in Iron Path’s main strategy. Deriving from the Italian term “via ferrata,” a fortified route along a challenging Alps climb, Iron Path provides a differentiated private equity experience for founders and management teams, focusing on what drives the greatest impact while building on the company’s culture and values to scale swiftly and deliberately, one secure step at a time. From day one, Iron Path Capital works hand-in-hand with management teams to add value through its unique blend of Wall Street capability and Main Street authenticity.
Learn more at Gougeon Brothers, Inc. and Iron Path Capital.
About Gougeon Holding Company
Founded in 1969, Gougeon is a leading formulator, manufacturer and marketer of high-quality two-part epoxy systems and ancillary products. The Company’s products include a wide range of epoxy resins, hardeners, fillers, and supplies for the composites, marine, automotive, aerospace, sporting goods, arts and crafts, and other end markets around the world. The Company manufactures WEST SYSTEM® Epoxy, PRO-SET® Epoxy, and Entropy Resins®, distributes PRO-VAC Vacuum Bag Consumables and publishes Epoxyworks® magazine. Gougeon is ISO 9001:2015 registered with primary operations in Bay City, MI. Learn more at Gougeon.com
About Iron Path Capital
Iron Path Capital is an operationally focused private equity firm making lower-middle-market investments across the healthcare and specialty industrial sectors. With offices in Nashville, TN and Charlottesville, VA, Iron Path Capital supports its partners with capital, operating expertise, business development, and industry relationships to achieve significant scale. Iron Path Capital focuses on growing companies with stable cash flows, superior management teams, defensible, scalable business models and multiple vectors for growth, both organic and through consolidation. Learn more at ironpathcapital.com
*Mr. Gurski is not a current client of Iron Path Capital, L.P., or an investor in any of its funds and was not provided with compensation for this statement. We are not aware of any material conflicts of interest with him providing this statement resulting from his and Iron Path’s relationship.
June 4, 2025
Aditya Birla Acquisition
Cargill
MILWAUKEE (June 4, 2025) Aditya Birla Group, a leading Indian multinational, has agreed to purchase Cargill’s Dalton, Georgia-based specialty chemicals business. Aditya Birla Group intends to expand the Dalton, Georgia facility’s capacity over the next two years, and will continue to manufacture the business’ current output of formulated resins, curing agents, reactive diluents and polyaspartic resins.
Grace Matthews, Inc. advised Cargill on this transaction.
ABOUT CARGILL, INC.
Cargill is committed to providing food, ingredients, agricultural solutions, and industrial products to nourish the world in a safe, responsible, and sustainable way. Sitting at the heart of the supply chain, we partner with farmers and customers to source, make and deliver products that are vital for living.
Our approximately 160,000 employees innovate with purpose, providing customers with life’s essentials so businesses can grow, communities prosper, and consumers live well. With 160 years of experience as a family company, we look ahead while remaining true to our values. We put people first. We reach higher. We do the right thing—today and for generations to come. For more information, visit www.cargill.com.
ABOUT ADITYA BIRLA GROUP
The Aditya Birla Group is a US$ 66 billion global conglomerate in the League of the Fortune 500. Anchored by an extraordinary force of over 140,000 employees belonging to 100 nationalities, the Group is built on a strong foundation of stakeholder value creation. With its presence across 6 continents and 36 countries, the Aditya Birla Group holds 130 state-of-the-art manufacturing units globally.
Today, over 50% of Group revenues flow from overseas operations that span 36 countries in North and South America, Africa and Asia. For more information, visit www.adityabirla.com.
ABOUT GRACE MATTHEWS
Grace Matthews, Inc., a Milwaukee-based investment bank, provides merger, acquisition, and corporate finance advisory services to private and public companies across the chemical and material science value chain. Over the past 25 years, Grace Matthews has successfully completed over 150 transactions on behalf of private, middle-market companies, private equity firms, and large multi-national corporations. For more detailed information on Grace Matthews, visit www.gracematthews.com.
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