KKR, Blackstone, The Carlyle Group, TPG, EQT, CVC Capital Partners, Apollo Global Management... All the major players in unlisted investment have been badly hit on the stockmarket over the past two months. The reason: the sharp decline in transactions already highlighted in recent quarters, which could be intensified by the effects of the Trump administration's decisions.

At the end of last week, the sector's largest player, Blackstone, presented its Q1 numbers. Overall, they are good and even slightly above expectations. However, the group does not believe that it will be spared by the crisis. Blackstone mentioned that market volatility could cause North American institutional investors to "slow down their decision-making" in terms of fund allocation due to lower returns.

Private equity involves investing in unlisted companies, often through debt-financed buyouts, with the aim of developing them, increasing their value, and then reselling them at a profit. However, if the number of transactions declines, it becomes difficult for companies to repay their clients, most of whom are pension funds, institutional funds, and high net worth individuals.

An analysis by Moody's Ratings reports that unrealized capital gains are reaching record levels and that the low number of transactions is preventing new capital from being raised, as the amounts are difficult to return to clients. With the introduction of customs barriers, the pressure would be even greater. The Wall Street Journal cites the example of office supply chain Staples, which was acquired by Sycamore Partners in 2017 for $7bn. The company imports a large portion of its inventory from Asia, where its production is located. Its competitiveness and growth would be directly affected.

Hugh MacArthur, president of the private equity division at Bain & Co, is even more pessimistic: "We're not even in a recession yet, and we're already in an extremely difficult situation. Customers are increasingly reluctant to make new investments, and fundraising for acquisitions fell by nearly 25% last year."

Financiers hate uncertainty and lack of visibility about the future. The current period makes planning for the future particularly complicated. However, these companies do have levers at their disposal to deal with a potential major crisis in private equity in the coming months. For example, Blackstone has diversified activities in real estate management, insurance, wealth management, and private debt, which is a solid growth driver in times of economic turmoil when banks reduce their lending activity. For its part, KKR is increasingly broadening its investment base, for example by acquiring a stake in the publicly traded medical equipment supplier Henry Schein. KKR thus becomes the largest non-index fund shareholder. With the same strategic momentum, Elliott Investment Management has acquired a $1.5bn stake in HP.

For now, the Trump administration has announced a 90-day suspension of the tariffs announced on "Liberation Day," with the exception of those on China. But a suspension does not mean a cancellation. Financial market confidence remains eroded, even though the Trump administration announced last night that a de-escalation with China is expected and that Fed Chairman Jerome Powell will not be fired. The exact opposite had been announced the day before.

The recovery of the private equity sector depends heavily on the restoration of confidence in the future. This requires, in particular, greater visibility on the economic, political and geopolitical decisions taken by the Trump administration.

In the absence of clarity and in an unstable environment, deals will remain limited. For now, it is therefore time to hunker down and limit the damage for those involved through related activities. At least, that is the case for those who have not bet everything on private equity. A downward revision of analysts' targets for the coming quarters would not be illogical.

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