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Acquisitions sector denies price reality, says Tikehau Capital

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“The takeover market has enjoyed very significant tailwinds, mainly driven by free to cheap money” (Image: Shutterstock)

The co-founder of Tikehau CapitalMathieu Chabran, said that companies of acquisition must face the reality of the prices of the businesses in the face of the increasing rates of fees global.

He expects more consolidation in the private equity sector.

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“The market is in a state of denial,” Chabran said in an interview Tuesday in Cannes.

“The takeover market has enjoyed very significant tailwinds, mainly driven by free to cheap money.”

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You banks will no longer give you a “prison release” card, he said.

The private equity asset class will face a period of reduced returns if lower corporate revenues coincide with an economic slowdown and rising interest rates, Chabran said.

“Returns were boosted by multiple expansions and ever more debt,” he said. “The next few months are going to be very interesting.”

Chabran, one of the most important founders of the private equity sector in Europehelped launch Paris-listed Tikehau at age 28.

The alternative asset manager now manages around 37 billion euros ($37 billion) in private equity strategies, real assets, private debt and capital markets.

The executive echoes other players in the sector that private equity valuations are likely to fall further, as higher capital costs make it difficult to obtain returns.

Fundraising is also getting harder for private equity firms, as institutional investors become more selective about which managers to support.

Apollo Global Management, Cinven, Clayton Dubilier & Rice and Nordic Capital are among companies raising new funds, according to data compiled by Bloomberg.

Chabran expects further consolidation in the private equity industry.

Tikehau itself is studying tactical acquisitions, with asset managers focused on a single strategy as potential targets, he said.

Shares of some publicly traded companies in the sector have halved in the past 12 months, Chabran said.

“You have more managers joining forces at much more realistic prices”, says the executive.

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Source: Moneytimes

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