PE’s Favorite Exit Strategy Isn’t an Exit Anymore

Good morning, ! This week we're covering the growing fragility behind global energy markets, private capital’s widening sector divide, continuation vehicles reshaping PE liquidity, and why tariffs are increasingly landing on the US consumer. 

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DATA DIVE

Oil Markets Are More Fragile Than They Look

Global oil demand is projected to rise from 94.3M barrels per day in 2024 to 112.4M by 2050, even as the world pushes toward renewables. More importantly, nearly 72% of global oil demand will come from non OECD economies by 2050, with Asia and the Middle East driving most of the growth.

That matters because the global energy system increasingly depends on a handful of shipping chokepoints. The Strait of Hormuz alone handles 20.9M barrels per day, or roughly one fifth of global oil consumption. The Strait of Malacca moves 23.7M barrels per day, making it the single largest oil transit corridor globally.

The market implication is straightforward: oil pricing is no longer just a supply and demand equation. It is a logistics equation. When the system runs near equilibrium, even a 1 to 2 million barrel disruption can send prices sharply higher. During the recent Hormuz tensions, Brent briefly surged above $126 per barrel, with some analysts warning of a path toward $200 oil in a prolonged disruption scenario.

For private equity, this changes underwriting assumptions across transportation, chemicals, industrials, and manufacturing. Energy volatility is no longer a macro side note. It is becoming a direct operational risk embedded into global supply chains.

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TREND TO WATCH

The Sector Divide Is Getting Wider

April deal activity sent a pretty clear message: private capital is crowding into sectors with durable growth narratives and operational upside. TMT led global PE and VC deal announcements with 33 deals, narrowly ahead of Industrials at 32, while Consumer landed at 18. Real Estate? Just 1 deal.

The interesting part is not that tech remains dominant. It is that Industrials are now running neck and neck with TMT. That points to a broader shift in sponsor appetite toward supply chain resilience, automation, defense adjacent manufacturing, and infrastructure linked businesses. In other words, the “old economy” is suddenly pricing like growth equity.

Meanwhile, sectors tied closely to interest rate sensitivity or weaker discretionary spending continue to lag. Financials and Materials both posted just 7 deals, while Real Estate barely registered.

The takeaway for sponsors is straightforward: capital is no longer chasing broad market exposure. It is concentrating around sectors where operational value creation still feels controllable in an uncertain macro environment. The era of buying beta and waiting for multiple expansion looks increasingly over. (More)

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DILIGENCE CORNER BY 150 DILIGENCE

Customer Concentration Risk Is Frequently Underwritten Too Conservatively

A common issue in diligence is that customer concentration is often treated as a disclosure point rather than a core valuation risk. Buyers and sponsors may acknowledge that one or two customers account for 20–40% of revenue, yet fail to fully underwrite the associated renewal risk, pricing pressure, and operational dependency embedded in those relationships.

The risk becomes more pronounced when those customers are sophisticated procurement organizations with significant bargaining leverage or credible vendor alternatives. Historical revenue stability can create a false sense of security, even though a single rebid, insourcing decision, or pricing renegotiation can materially reduce EBITDA over a short period.

For example, a business generating 30% EBITDA margins with a largest customer representing 35% of revenue could see margins compress to 22% if that account reprices by 10% while the company’s fixed cost base remains largely unchanged. What initially appears to be manageable commercial downside can translate into a disproportionately large earnings impact.

LIQUIDITY CORNER

PE’s New Exit Strategy Isn’t an Exit

Private equity firms spent the last three years talking about “exit optionality” because the traditional exit market largely stopped cooperating.

Now, Continuation Vehicles (CVs) are evolving from niche workaround to core liquidity infrastructure. Nearly 75% of the world’s largest PE firms have completed at least one GP-led continuation deal, using CVs to generate distributions while holding onto high-performing assets longer.

The market is increasingly splitting into two camps: Single-Asset CVs (SACVs) for trophy assets, and Multi-Asset CVs (MACVs) for broader portfolio management. Investors are rewarding the difference. Roughly 56% of SACVs priced at or above NAV in 2024, versus just 26% of MACVs, signaling that buyers increasingly care more about the underlying company than the sponsor itself.

The tension: sponsors are often selling assets from one pocket to another, putting governance, pricing, and fairness opinions under a much brighter spotlight. Still, in a market where IPO windows remain unreliable, CVs are quickly becoming PE’s preferred way to create liquidity without surrendering upside. (More)

MACROVIEW

Who Is Really Paying the Tariff?

The answer is becoming harder to ignore: mostly American consumers.

New Fed and Yale Budget Lab research suggests the 2025 tariff regime passed through to prices far more aggressively than many policymakers expected. By late 2025, the realized effective tariff rate climbed near 10%, versus just 2.4% at the start of the year. But the more important number is the pass through rate. Estimates now suggest roughly 70% to 90% of tariff costs ultimately flowed into US consumer prices.

Why? Because tariffs hit sectors with relatively inelastic demand. Appliances, electronics, household goods, and durable products are difficult to substitute away from quickly, giving importers and retailers room to raise prices without fully absorbing margin compression.

The data are blunt. Core goods inflation reached 2.3%, while estimates excluding tariff effects sat near negative 0.7%, implying tariffs explain nearly the entire excess inflation in core goods.

Foreign producers absorbed little of the burden. Import prices excluding tariffs barely fell, while US households paid more at checkout. (More)

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