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- The Bid-Ask Gap Problem: 43% of PE Say Pricing Is #1 Risk
The Bid-Ask Gap Problem: 43% of PE Say Pricing Is #1 Risk
The bid-ask gap is freezing deal flow, private credit fears are shifting toward liquidity risk, the U.S. South is outperforming as PE’s quiet powerhouse, and college sports just became a bona fide investable asset class.
Good morning, ! Today we’re covering why the U.S. South remains private equity’s quiet favorite, how price gaps are freezing private credit deal flow, what sponsors really fear in a $1.6T credit market, and why college sports just became a new PE asset class.
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MICROSURVEY
What's Lurking in Private Credit?
The private credit boom is no secret—but the risks look different depending on where you sit.
In our proprietary survey (N=132), 60% of PE sponsors flagged illiquidity in distressed scenarios as the biggest threat. Consultants were close behind at 57.1%. Bankers were more divided, with 34.7% citing rising borrower default rates, nearly matching the 34.7% who fear illiquidity.
Despite headlines about underwriting risk, only 30.3% of all respondents chose that as their top concern.
Private credit has gone from niche to $1.6T mainstream. But when downturns hit, liquidity vanishes fast—and mark-to-model valuations don’t help. GPs are betting on flexibility. LPs may be betting on miracles. (More)
PRIVATE CREDIT
PRIVATE CREDIT
Private credit lenders are entering 2025 with the same migraine as everyone else: a yawning lack of alignment on purchase price. With 43% of dealmakers calling it their top concern, the bid-ask spread is effectively the industry’s gravitational force — everything bends around it. Just behind, Competition jumped to 36%, leap-frogging both Inflation/macroeconomic risks and lack of quality assets, as sponsors swarm the few assets that actually trade. For private credit funds, this cocktail means more structured solutions, tighter underwriting, and plenty of deal-by-deal gymnastics. The irony: lenders have capital and appetite, but sellers want yesterday’s multiples while buyers want tomorrow’s recession discount. Until that gap narrows, expect more creativity and fewer closings. (More)
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REGIONAL FOCUS
PE’s Favorite Region? Still the South.
Across the top 10 U.S. investors, the South quietly leads with 34% average exposure, signaling its continued appeal as a value-creation zone. Firms like Vista (51%) and CD&R (59%) are particularly bullish below the Mason-Dixon line. The West, while still crucial, doesn’t dominate—unless you’re Silver Lake, whose portfolio is 90% West, an outlier in an otherwise regionally balanced club. Most firms—including Blackstone, Apollo, and KKR—spread their bets across 3–4 geographies, reflecting a strategy driven more by fundamentals than zip codes. Translation: regional diversification still rules the capital stack. (More)
DEAL OF THE WEEK
PE’s First Down in College Sports
Private equity has cracked open a new asset class: college athletics.
The University of Utah is finalizing a first-of-its-kind deal with Otro Capital, a New York-based sports PE firm, to launch a joint venture — Utah Brands & Entertainment LLC — that will operate much of the university’s athletic department as a for-profit entity.
The deal includes:
A nine-figure capital infusion from Otro
Additional equity stakes offered to select university donors
Projected capital commitments exceeding $500M
Why this matters:
Universities are under pressure. With NIL, declining media revenue share, and rising costs, athletic departments are edging toward quasi-professional models. Others (Michigan State, Clemson) have created private sports entities — but none have taken private equity capital. Until now.
This is more than a splashy partnership — it’s a blueprint. If Utah proves the model works, expect other Power Five schools and conferences (see: Big 12, Big Ten) to revisit shelved PE talks.
The kicker? Utah retains a buyback option on Otro’s stake in 5–7 years — classic GP-style structuring, adapted for a college campus. (More)
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