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I'm looking to lateral from a general M&A group into a more PE focused group. A few friends and I have been discussing the risks of lateraling, including the risk that a recession may hit after we make the move. This led to a discussion of how hard hit PE groups may get during a minor dip/recession. With record levels of cash that PE firms are holding right now, I can't help but feel that many firms with the best PE clients may endure the recession a bit better than most as those PE firms buy up companies on the cheap with their large reserves of cash.

One argument against this is that PE firms could get squeezed as their assets take a dip in valuation and they must continue to pay interest on the leverage used for the buy out. Another is that lenders will not lend and so it will be hard to finance an LBO. However, if it is not a huge crash like in 2009, I believe all the cash raised by the industry will outweigh this in the aggregate.

Anyone have thoughts on this? Any data or experience to speak to it?

No expert but I think Asset valuation doesnt produce cash flow, cash flows may be affected by holding longer than term the investments + not being able to charge PE compnies certain fees. Credit usually at the fund level is secured by capital calls so they are good unless these investors start defaulting. Firms may aso have some issue raising new money but they will have small fees on commitments/invested capital. I wouldn’t try to time the market for this sort of moves and just do what you want to do.