By Emma-Victoria Farr
BERLIN – Reality star Kim Kardashian’s arrival at a gathering of the globe’s top deal brokers in Berlin failed to dispel their dark mood as the rising cost of money puts the brakes on the private equity industry.
Flanked by bodyguards, Kardashian drew a crowd of hundreds of executives at the SuperReturn industry event, saying she wanted to learn the secrets of investing having set up her own fund last year.
Talking about her ambitions, Kardashian, whose empire spans skincare and underwear, sought what she called the “magic sauce” or special qualities of founders of companies which her fund, that has yet to make an investment, could back.
But private equity is currently experiencing one of its toughest runs since coming of age in the 1980s as rapid rises in interest rates to combat inflation make the debt that underpins the industry scarce and expensive.
More than a decade of rock-bottom borrowing costs had allowed investors to snap up companies using vast loans before selling them on to other investors, who were also buoyed by cheap credit.
Now euro zone data shows that banks are turning off the credit taps after the European Central Bank raised rates by the most in its 25-year history.
The value of private equity-backed mergers and acquisitions in Europe stood at roughly $46 billion in the five months to end-May, down 74% from the same period of 2022, according to data from Refinitiv. — Reuters
