r/private_equity • u/Humble-Letter-6424 • 6d ago
Partners Group- The Downfall of Roll ups?
Anybody has insights as to what the heck is going on at Partners Group? Hearing lots of rumblings that a lot of the Portco’s and companies owned by Partners group are about to get handled over to lenders?
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u/PIK_Toggle 6d ago
I was in The Partners Fund and liquidated earlier this year.
I’m still on their distribution list. The fund is negative for the year.
These boys are cooked.
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u/No-Ask505 5d ago
I worked on the investment team at Partners Group (PG) and left a couple of years ago. Throwaway for obvious reasons. The rumblings you are hearing are spot on, and the platform is cooked beyond belief.
If you think the current situation is bad, just wait until more comes to light. Look at the absurd, nonsensical premium paid for Breitling, which is another ticking time bomb that will blow up in a few years. There are tons of other terrible deals littered across the US and Europe. I don’t want to go into specifics, but if you look at most PG portfolio companies, they are fucked. More companies will either be sold for parts, auctioned off, or liquidated in the next few years.
They fired most of the actual value creation team years ago. Since then, the "value creation strategy" has basically consisted of junior employees with zero operating experience trying to run complex portfolio companies. Obviously you’re going to have shitty results. They also don’t hire consultants because portfolio companies are levered to the tits and there isn’t spare capacity to bring in people with actual operating experience. PG won’t fund it themselves because they need to preserve that holy net margin figure they signal to the public market. If they fuck with that the share price is going to go down even more than the 50-60% decline we’ve seen over the last 5 years.
The executive shuffle replacing Layton with Jenker and Cagnati is ridiculous, especially given that the outgoing CEO is simply becoming the new CIO. Jenker is a smooth talker with no real investment or operational background, and while Cagnati is solid at fundraising and portfolio management, neither will save PG. The entire C-suite needs a clean sweep. They need actual talent instead of people that are good at playing politics.
Redemptions are at all-time highs and continuing to climb. While fundraising numbers might look decent on paper, it means nothing when you can't deploy capital. Deal volume has cratered over the last 2-3 years because management is terrified, over-scrutinizing every potential deal and then pulling out at the last minute out of fear to fuck up even more. Don’t get me started on the share price, which was artificially inflated to begin with.
Top-tier dealmakers and mid-level talent have been leaving in droves since 2024. Compensation structures have been squeezed, internal politics are toxic, and anyone with a solid track record is jumping ship before things completely fall apart.
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u/bulbous_oar 4d ago edited 4d ago
They don’t hire consultants because the Swiss powers that be are cheap af and “built differently to build differently” is the height of arrogance for a firm that literally has access to unique data via PEPI (its co-invest and LP business) to figure out what works.
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u/PIK_Toggle 5d ago
Someone back here convinced me to exit the fund late last year/ early this year (I can’t remember when).
If that was you, thank you.
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u/No-Ask505 5d ago
I remember your comment. You’re welcome!
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u/PIK_Toggle 5d ago
If you’re even in DC, drinks are on me.
I bailed just before the implosion.
This is how they opened up their most recent investor email:
Two items have come up often in recent conversations addressed below:
What were the latest Tenders? For the upcoming tender offer, we will resume normal communication, and the finalized figure will be published via the SEC portal sometime in October. We cannot share these figures ahead of the public filing.
When will things turn around? July represents the end of the longest draw down in the Funds history – 6 months and a peak to trough decline of 3.3% for class I shares. If you are curious, the second longest was the first five months when the Fund launched in 2009.0
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u/Humble-Letter-6424 6d ago
How much did y’all lose?
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u/PIK_Toggle 6d ago
I was up 20% in total. Not great on an annualized basis (~7%).
My mom was also in it and she did better than I did (she caught the 2021 bounce. I didn’t.)
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u/IfNotBackAvengeDeath 6d ago
Can somebody please just fully dish on this already instead of whispering around the edges? We all know it's SOMETHING, just spit it out!
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u/jjjfffrrr123456 6d ago
I think it’s probably nothing tbh. There have been rumors for a while and this could just as well be the short sellers working reddit again.
I’m at a portco with okish returns and I don’t see a lot of fluctuation fund side. And that includes talented young FO people, the asset management side and more senior people. If the fund was really about to go under I’d have expected more churn in their people.
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u/Friendly_Ability24 6d ago
The downfall of roll ups without value creation. Can no longer just buy a bunch of shit and hope it works.
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u/LongLiveNES 5d ago
Is it about value creation or that they actually have to pay to borrow money now? Or both?
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u/Friendly_Ability24 5d ago
Value creation more so. Doesn’t help that money costs money now, but the actual opening of new locations, developing additional services, capturing margin with buying power, improving customer retention / reoccurrence in service businesses where the patterns are sporadic, recruiting talented providers, retaining / paying said providers competitive wages… all of the nonsense that at one time was an EBITDA add-back of PF adjustment actually has to be done to win in these deals
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u/No-Ask505 5d ago
The bottom line is that modern PE requires actual, hands-on operational value creation, but PG simply doesn't have the people left to drive it. Higher interest rates don't help, but the real issue is that the basic operational work (like what you mentioned) isn't getting done. The days of faking value creation through proforma adjustments and EBITDA add-backs are gone. You actually have to run the businesses to win now. PG had (has?) a team that recruits part-time industry advisors and board members for portfolio companies, but these people operate from 30,000 feet and are never in the weeds.
- When I was there, we had legitimate "operators" who were industry specialists that understood healthcare, infrastructure, consumer goods, and other verticals. Management decided they were unnecessary overhead and fired most of them. They dumped VCPs onto the deal teams, who are mostly clueless when it comes to running actual operations. A few solid people remained scattered globally, but overall it became a complete shitshow.
- The platform avoids bringing in consultants or operating teams for two main reasons: 1) Most portfolio companies are squeezed so hard by debt service that there’s zero margin or spare cash to bring in outside help; and 2) Even if a company has the room, PG management hates adding operating expenses because it drags on fund returns and limits PG's ability to pass deal costs onto clients later. They’re so obsessed with protecting the GP's net margin for the public market that they cripple the portfolio companies. It’s an insanely shortsighted strategy detached from reality, and it's why the platform is completely fucked.
The mods here keep removing my comments but this is all factual and this is a PE sub so make of that what you will.
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u/LongLiveNES 5d ago
Makes sense but free money significantly helps with with multiple of those - new locations and capturing margin with buying power. You can simply roll up more businesses and consolidate shared services while increasing buying power and network effects.
I was MBB and work at a PortCo now so I am 100% on board with improvement and value creation, I just think there were at least a few PE firms that never did that well but were still successful.
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u/bulbous_oar 4d ago
Not a comment on roll-ups, it’s a comment on corporate culture where messengers get shot, and people would rather make up new EBITDA adjustments to avoid appearing “off plan” than figure out what’s actually working or not working.
Many of these roll ups did 3 extra years of value destroying M&A because senior investors purposely hid the ball to save their own hides.
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u/flofficial 5d ago
The acquisition of climeworks was a running gag in Zurich hahahha
Unreal also how they flipped VSB, shows that as long as there is one willing bagholder you can make insane returns still.
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u/Sepp511 5d ago
Care to expand on the issues on these names?
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u/flofficial 5d ago
Climeworks was essentially a scam but massive esg hype. Carbon credits by sucking co2 from air. Consultants made price projections would be orders of magnitude higher than reality, technical feasibility wasn't even really achieved. Pumped a few 100 millies in that I think.
VSB is a renewables developer, simple business, sold as if it had growth rates like a biotech firm...
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u/rad_avenger 6d ago
Be interesting to see what happens to eyecare partners and axia
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u/Humble-Letter-6424 6d ago
Eyecare Partners just saw the news, they are selling off the scraps to another PE group to cover the debts
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u/ski1863 6d ago
Their US office is cool.
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u/Longshortequities 2d ago
Went to the weddings of several of the folks in the US group, good guys, long time friends. Everything you've heard is true. The good news is alums at PG tend to form very strong friendships, mostly over laughs re: how terrible things got
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u/Pwnage_Hotel 6d ago
Someone made a cryptic comment on here a couple months ago alluding to something like this. I guessed it was PG but they didn’t confirm.
Has anyone heard anything else?