[Edaily Marketin YunJi Kim Reporter] In the global private equity market, while the number of corporate divestitures has declined, transaction values have risen, leading to an increasing concentration of activity in large-scale deals. This is due to buying interest concentrating on select large, high-quality assets with promising medium- to long-term growth potential, while a significant number of assets remain unsold amid high interest rates and disagreements over corporate valuations. Even in this environment, some major asset managers, such as KKR and Carlyle, are increasing their capital recovery through successive sales of portfolio companies, widening the performance gap among asset managers.

According to global financial information provider S&P Global Market Intelligence on the 10th, the number of investment exits by private equity funds (PEFs) and venture capital (VC) firms worldwide in the third quarter of this year totaled 724, a 17.4% decrease compared to the same period last year. In contrast, the total amount of capital raised reached $227.2 billion (approximately 304 trillion won), a 5.4% increase. Although the number of deals decreased, the total amount actually increased. This is interpreted as funds concentrating on a few large deals while a significant number of transactions were delayed due to high acquisition financing costs and disagreements between sellers and buyers over enterprise value.

This trend is also evident in the third-quarter earnings reports of major asset managers. Notably, KKR recently announced that its adjusted net income rose 29% year-over-year to approximately $1.6 billion (approximately 2.1401 trillion won). Carlyle also reported distributable earnings per share of $1.12, exceeding the market consensus of $1.

For both firms, the sale of portfolio companies to recoup investment capital underpinned their earnings. In particular, divestitures were concentrated in sectors requiring specialized expertise or featuring stable demand, such as semiconductor equipment, data centers, infrastructure, and insurance. For example, KKR finalized the sale of CoolIt Systems, a data center cooling systems provider, and Atlantic Aviation, a private aviation infrastructure platform, in the third quarter. In August, KKR agreed to sell insurance brokerage USI Insurance to Aon for approximately $17 billion. Carlyle also divested its 27% stake in Japanese semiconductor inspection equipment maker Rigaku and completed the sale of electron microscope manufacturer Teskhan Group.

It appears that these companies’ growth potential and stable revenue bases played a key role in their ability to secure buyers. This is explained by the fact that demand for data center cooling equipment is rising due to the expansion of the artificial intelligence (AI) market, while the medium- to long-term growth potential in the semiconductor equipment sector is also coming to the fore; furthermore, infrastructure and insurance have business structures that are relatively less sensitive to economic fluctuations. Simply put, amid rising acquisition financing costs, buyers have prioritized companies whose future performance and cash flows are easier to predict over those with high uncertainty, leading to a concentration of transactions on these assets.

As it has been selling off some of its portfolio companies one after another, the firm has also gained some breathing room in terms of capital recovery. KKR projected that the funds to be returned to investors this year would exceed $40 billion (approximately 53.48 trillion won). This figure exceeds the previous annual record by more than 50 percent. The situation at Carlyle is similar. Carlyle raised $8.8 billion (approximately 11.7656 trillion won) in the third quarter alone, of which $5.7 billion (approximately 7.6209 trillion won) came from its private equity division.

However, despite a series of divestitures, the overall returns on the investment assets held by both firms fell short of expectations. KKR’s third-quarter private equity investment return remained at 0%, and realized performance fees also decreased to approximately $490 million compared to the same period last year. Carlyle, too, saw the valuation returns on its buyout and real estate investment funds remain flat. The firm explained that while it succeeded in divesting some companies, this did not translate into improved profitability across its overall portfolio.

Capital recovery across the market as a whole remains sluggish. According to a recent report by KPMG, the number of capital recoveries by global private equity funds over the past 12 months, as of the end of the third quarter of this year, stood at 3,295—the lowest figure since the first quarter of 2021. With capital tied up in assets where sales have been delayed, the burden of securing funds for new investments or raising follow-on funds is growing.

Commenting on this, Ben Honeywood, a partner in KPMG’s Private Equity Group, stated in the report, “While it is true that the private equity market is recovering, the recovery is not uniform.” He added, “While the exit market is reopening, centered on large transactions, investors continue to take a selective approach toward other deals.”