PAG is considering a tender offer to buy about $1 billion worth of stakes in its funds from existing backers, according to people familiar with the matter, as private equity investors reckon with the ongoing slump in dealmaking.
Asia’s biggest multi-asset manager is working with an adviser to help sound out potential buyers for the stake sale, which PAG could also participate in, the people said, asking not to be identified as the information is confidential. Buyers may also be required to stump up a total of about $300 million for the private equity firm’s latest fund, the people said.
Discussions are ongoing, terms of any potential investment haven’t been finalized and details such as the size and composition of the funding may change, the people said. A representative for PAG declined to comment.
A number of firms that typically invest in private equity strategies have come under pressure as interest rates have climbed. The growth-stage companies they funded in recent years have been stranded by a slump in the initial public offering market, leaving backers unable to exit and looking to the rest of their investments, including private equity stakes, as potential sources of liquidity.
Many institutional investors, such as pensions and endowments, reached the limits of what they could allocate to private equity during last year’s inflation-fueled market swoon.
Rival firms have proposed similar plans to their backers. Apollo Global Management Inc. approached some of its investors about raising money for its newest private equity fund by cashing them out of an old one at a discount, pitching it as a way to ease clients’ liquidity pressures, Bloomberg News reported in April.
Private equity faces an increasingly competitive fundraising environment, with firms taking longer to reach their goals amid factors such as higher financing costs. PAG slashed its fundraising target for its newest Asian buyout fund from $9 billion to $6 billion, falling victim to an increasingly contentious political climate between the US and China, people familiar with the matter have said.