Private equity’s $860 billion zombie company problem
The zero-interest-rate era left private equity with thousands of companies it can't exit, can't sell, and can't quite kill.
Private equity firms face a growing problem with "zombie" portfolio companies, which have been sitting stagnant for years, holding a staggering $860 billion in net asset value. According to PitchBook data, nearly 4,500 U.S.-backed private equity companies are in this zombie stage, representing around 33.8% of all portfolio companies.
These companies have been held for at least five years, with some dating back ten years. This glut of zombie companies is largely attributed to the low-interest-rate environment, which spurred a buying frenzy during the post-COVID period. As interest rates climb, it becomes increasingly difficult for these companies to generate the operational improvements needed to realize a successful exit.
Private equity experts predict that this zombie problem will eventually resolve itself, either through forced exits by investment partners or through natural business decline, leading to bankruptcy or winding down.
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