PE's New Math: Why 4.2% Earnings Growth Is the Bar

Good morning, ! This week we’re covering ESG levers as a core part of the value creation strategy, the latest U.S. private equity latest activity, and what is the preferred size for a private credit deal. Also inside: Aquarian and TPG bidding war on Brighthouse.

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DATA DIVE

From Buzzword to Balance Sheet

European PE firms are no longer treating ESG as a compliance box—they’re baking it into deal sourcing, due diligence, and exit strategy. In fact, 72% say ESG levers are core to value creation, and another 25% are close behind.

But the real shift? ESG is becoming quantifiable. Nearly three-quarters of GPs now track ESG KPIs across their portfolios. Think emissions, board diversity, and employee safety—measured, benchmarked, and tied to incentives.

Meanwhile, the regulatory drumbeat is only getting louder: SFDR, CSRD, and the upcoming CSDDD are forcing firms to get fluent in sustainability—or risk reputational (and legal) damage.

This isn’t ESG for marketing decks. It’s performance-driven sustainability, and the data says it’s here to stay.

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TREND OF THE WEEK

The Earnings Arms Race

Private equity is no longer just about leverage; it's about operational brute force. With interest rates stuck at 7% and hold periods extending, the math has changed: to hit a 20% IRR, sponsors need 4.2% annual earnings growth—2.5x what was required when money was cheaper. That’s not financial engineering; that’s a corporate transformation mandate.

Expect more sponsors doubling down on pricing power, product strategy, and AI-led efficiencies, while continuation funds and secondaries become standard-issue tools. And while deal flow still limps, activity is clustering around sectors with durable cash flows and low capital intensity (read: SaaS, healthcare platforms, tech-enabled services).

Bottom line: Value creation isn’t optional anymore—it’s the cost of staying in the game. (More)

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With over 50 senior speakers from firms like Apollo, KKR, Carlyle, Neuberger Berman, and Warburg Pincus, the Summit is designed for decision-makers driving the next decade of private capital.

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LIQUIDITY CORNER

Fund Closures Fall to Pre-2017 Levels

The number of global PE funds closed is trending down sharply. After peaking at 1,153 funds in 2021, closures dropped to 562 in 2024—a level not seen since 2016. That’s a 51% decline in just three years.

The reasons are familiar: slower exits, tighter LP budgets, and tougher fundraising conditions. GPs are staying in the market longer, relying on bridge capital, or shelving launches altogether. The result? A structural bottleneck that’s reshaping capital deployment cycles across the industry.

For LPs, fewer fund closures mean delayed commitments and reduced diversification. For GPs, it's a Darwinian phase—only differentiated strategies or top-quartile performance are getting across the finish line.

Bottom line: The fundraising engine has stalled. Until exits return and distributions pick up, expect more consolidation, fewer first-time funds, and extended timelines for closings. (More)

DEAL OF THE WEEK

TPG and Aquarian in Final Bidding for Brighthouse

Brighthouse Financial ($3.4B market cap) has narrowed its potential buyers to two: TPG and Abu Dhabi-backed Aquarian Holdings. The U.S. life insurer, spun off from MetLife in 2017, has been exploring a sale since January, with final bids expected in early July.

While Jackson Financial and Sixth Street showed partial interest, only TPG and Aquarian remain in contention to acquire Brighthouse in full. A deal is far from done—complex due diligence and potential financing could stretch the timeline by months.

Why it matters: Brighthouse is the latest example of a larger trend: private equity converging on insurance platforms. With annuity books offering long-dated assets and stable liabilities, these platforms give PE firms capital to recycle across credit, infra, and alternatives.

For TPG, which lacks a major insurance business, this could be a foundational acquisition. For Aquarian—already backed by RedBird and Mubadala—it would scale a portfolio it’s been quietly assembling. Either way, this is another step in PE's insurance consolidation playbook. (More)

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PRIVATE CREDIT

Scaling Up, Not Tapping Out

The middle market may be the soul of private credit, but the money’s clearly chasing scale. A majority of managers now target $250M+ deal sizes, with $500M+ preferred by nearly 1 in 3. Compare that to just 19% last year.

Why? Speed, confidentiality, flexibility—and the need to deploy capital. Fewer players want to underwrite $50M–$150M tickets, and the <$50M slice has dropped from 14% to 8%.

Private credit is no longer the alternative—it’s the plan A. As public markets stay volatile and bank lending gets regulated into irrelevance, private lenders are becoming the go-to source for large, bespoke financings. (More)

MICROSURVEY

MACROVIEW

Oil’s Panic Immunity

Despite missiles flying over the Middle East, Brent crude oil barely blinked. The price spike after the U.S. strike on Iranian nuclear sites fizzled fast—from $81.40 to $67.14. This isn’t apathy; it’s evolution. Today’s markets don’t panic—they parse data, track tankers via satellite, and shrug at regional drama. Why? Infrastructure investments (like Saudi Arabia’s Red Sea bypass) and shrinking OPEC clout (now just 33% of global supply) have turned once-catastrophic scenarios into background noise. Still, don’t get too comfortable: a return to $100 crude could kick central banks off their rate-cutting path. Inflation: still the boogeyman. (More)

THIS WEEK IN HISTORY

June 2008: The $2 Fire Sale That Changed Wall Street

Seventeen years ago this week, J.P. Morgan agreed to acquire Bear Stearns for just $2 a share, marking the first major rescue of the 2008 financial crisis. With Bear’s stock trading at $30 the day before, and having peaked above $170, the deal was a historic collapse—and a harbinger of the chaos to come.

The Fed stepped in with a $30B backstop to facilitate the transaction. J.P. Morgan later raised the offer to $10 per share, but the damage was done. Bear’s failure was rooted in its exposure to toxic mortgage securities, and its implosion triggered panic across the financial system.

For J.P. Morgan, the bargain came with a massive bill: over $19B in legal costs, much of it tied to Bear Stearns and later, Washington Mutual. CEO Jamie Dimon would later tell shareholders, “No, we would not do something like Bear Stearns again.”

Why it matters: This deal didn’t just signal the start of Wall Street’s unraveling—it reshaped it. It remains a cautionary tale about distressed M&A in a crisis: sometimes the house on fire burns your own. (More)

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TWEET OF THE WEEK

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