私募股权退出拥堵推高结构化股权融资需求，Apollo受益但缺少可交易增量

Private equity managers have found another way to placate investors frustrated by a lack of cash returns.

Global buyout firms amassed close to $4 trillion in assets by snapping up companies at high valuations when interest rates were low. Now, with rates higher, many are struggling to exit investments and send money back to their investors.

The logjam is private equity’s biggest problem, and has led firms to embrace a range of financial engineering techniques. The latest approach is known as structured equity, and involves deals that blend features of stock and debt.

The custom trades boost a key measure of fund performance. At the same time, firms can keep hold of companies they can’t yet sell at a good price, or want to grow further, without adding to the debt burdens on those businesses.

“There's a large and growing universe of companies that have been owned by the same private equity firm for six years or so, with positive growth trajectories but with too much leverage to borrow more cash in conventional ways,” said Ranesh Ramanathan of DLA Piper.

“It's this group that these investors are targeting,” said Ramanathan, who leads the law firm’s capital solutions practice.

The buyers on other sides of these trades are typically private capital titans such as Apollo Global Management Inc. and Bain Capital.

They get attractive returns: usually around a mid-teens percentage, when debt from the same company might carry a single-digit annual yield. The instruments are less risky than regular stock, ranking ahead of it in the queue for repayment.

But to skeptics the trades are a costly Band-Aid. They don’t represent the actual exits that private equity firms are ultimately seeking to achieve, yet still offer handsome rewards to Wall Street’s smart money.

Many big institutional investors are wary of trading off long-term returns for upfront cash, and sometimes find these deals frustrating, the body that represents these limited partners says.

Machinery Maker

The instruments, including various kinds of convertible and preferred securities, aren’t new. But what is new is private equity’s embrace of these methods to wring cash out of portfolio companies for investors.

The industry has already adopted an array of other tools, including piling on new debt through so-called dividend recapitalizations, raising net-asset-value loans backed by batches of companies, and flipping assets into new continuation funds.

Read more: Private Equity Cash Crunch Spawns Even More Newfangled Financing

The same fundamental issue underlies much of this dealmaking. In total, buyout firms are sitting on $3.8 trillion of unsold assets, while the average holding period for investments has grown to seven years, Bain & Co. said earlier this year. Holding times for investments have lengthened steadily in recent years, from an average of 5 years in 2010.

Take Syntegon, for example. Based outside Stuttgart in Germany’s industrial heartland, the company makes packaging machinery, working with drugmakers such as Bayer AG and food companies like Alfred Ritter, the closely held owner of Ritter Sport chocolate.

CVC Capital Partners Plc bought the business from Robert Bosch, the privately held conglomerate, in a deal that closed in early 2020. By late 2025, the time had come for CVC, one of Europe’s largest buyout firms, to explore a sale.

It engaged with prospective buyers, eyeing a valuation of more than €4 billion ($4.7 billion), people familiar with the matter have said, and also considered a stock offering in Zurich. In the end, however, CVC undertook two moves that let it hold onto the business but hand cash to investors.

In March, CVC said it had sold a 37% stake to Apollo, without giving further details on the deal structure or price. The investment was in the form of structured equity, people familiar with the matter said. It also carried out a dividend recap, raising new debt to fund a shareholder payout of more than €550 million.

CVC declined to comment. Syntegon didn’t respond to requests for comment.

‘Structural Problem’

The difficulty of selling companies has pushed down distributions to paid-in capital, a key measure of performance in the industry that compares investor payouts with the sums they originally contributed. Industry-wide DPI hit a record low last year, according to McKinsey & Co., based on rolling five-year periods since 2000.

“The exit backlog has become a structural problem for private equity firms,” said Rahel Schneider, a partner at McKinsey. The industry is also recognizing that holding periods of five to seven years might not work for all investments, she said.

The cash crunch has only made DPI more important to limited partners. Four years ago, just 8% of fund investors polled by McKinsey said this was the most critical measure of performance. By 2025, that figure had jumped to 21%.

Deals that help boost DPI are “a growing part of what we do,” said Barnaby Lyons, Bain Capital’s global head of special situations.

“The private equity industry is in the business of investing LP capital, and over time returning capital,” Lyons said. “Historically, that was through selling companies, whether into the IPO market, or to trade buyers or other financial sponsors, or more traditional dividend recapitalizations. Now there is a much wider range of options available to them.”

Home Remodeling

Structured equity trades vary in form, but typically involve preferred stock with no maturity date and fixed, high dividends that must be paid before common stockholders. Backers are usually repaid when a company is sold or floated.

For portfolio companies, it means having another stakeholder to answer to, typically with a say in governance.

The instruments can encourage an eventual sale of the business, for example with dividends that ratchet higher over time. Other terms can give holders the right to force an exit later down the line, or give them extra protection if a business underperforms. Some securities can convert into common stock under specified conditions.

One recent deal involved Power Home Remodeling, a Pennsylvania-based firm that specializes in renovating houses and making them more energy-efficient, by installing features such as new doors, windows, sidings and attic insulation. In May, the company secured new funding in a deal with Bain Capital, Sixth Street and the structured-capital arm of Harvest Partners.

The fundraising included $450 million of redeemable preferred equity and $1.2 billion of convertible securities, according to S&P Global Ratings. Like Syntegon, the company also undertook a dividend recap.

The deal lets the company’s existing backer, Harvest’s private equity arm, return cash to limited partners while keeping a stake in Power Home as it continues to scale up.

The company’s co-chief executive officer, Asher Raphael, said the deal helped fund cash bonuses, paid to all employees, that totaled $360 million. “It is their hard work that creates value in the organization and we have always believed that they should share in that value,” he said in an emailed statement.

‘More Flexible’

The deals are part of a broader surge in hybrid instruments — bespoke funding often provided by private capital firms that sits somewhere between traditional debt and equity.

“What we see in the market is a need for financing solutions that are more flexible than traditional debt or equity,” said John Sinik, managing partner at Metric Capital.

“Many founders, families and management teams want to fund growth, acquisitions or shareholder liquidity without giving up control or over-leveraging their businesses,” Sinik said.

In the case of private equity, “the need for hybrid reflects the cost of financing, the difficulty taking companies public and, in some cases, varying opinions on value,” said Matt Nord, head of the hybrid business at Apollo, speaking in general terms rather than about specific investments.

Investors, however, want private equity firms to be selective.

A survey conducted late last year by the Institutional Limited Partners Association found 60% of respondents prioritize long-term returns over near-term liquidity.

Limited partners would generally prefer to hold onto assets “versus getting distributions back, if that has a negative impact on their returns on the longer term,” said Neal Prunier, the association’s managing director for industry affairs.

“There are times where the preferred equity approach will be appropriate and there are times where it will cause frustration among LPs. That's why it’s important to communicate early with the investors about your intentions,” he said.

Ludovic Phalippou, the academic and industry critic, said structured equity looked economically like a dividend recapitalization, since it was also “expensive capital” that was used to finance shareholder payouts.

“What I find most striking is the circularity of the capital flows,” said Phalippou, a professor of financial economics at the University of Oxford’s Said Business School. “Ultimately, the same pension funds, endowments and sovereign wealth funds sit on both sides of these transactions.”

“At the level of the individual transaction this may be perfectly rational,” he said. “At the level of the system, however, it is another example of capital being recycled between vehicles owned by the same investors while generating additional fees and spreads for intermediaries.”

Massive Part

Data on issuance volumes is hard to come by, because structured equity deals are typically agreed privately between a buyout firm and one or more private capital providers, such as Blackstone Inc., Sixth Street or Goldman Sachs Asset Management.Still, market participants say they are becoming more common in the US and Europe, and are being discussed as options for some companies in Asia.

At Apollo, such deals are a key part of the firm’s broader hybrid capital business, which provides structured equity and debt to business owners who want to raise capital without relinquishing control.

In dollar terms, investments by Apollo’s hybrid practice so far this year are three times what they were in the same period in 2025, according to a person familiar with the business.

Read more: Apollo Raises $6.5 Billion for Hybrid Debt-Equity Strategy

Similarly, Paul Hastings has seen a surge in both hybrid deal volumes and in investment firms participating in these deals, said Alex Temel, the Chicago-based co-chair of the law firm’s private equity practice.“It's become a massive part of where the industry has gone,” Temel said.