How Rising Interest Rates Affect Private Equity

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In this video, we'll discuss some of the main ways that interest rates impact private equity investing. We'll talk about how rising interest rates increase a company's cost of capital, make LBOs harder, and influence asset allocation.
Peak Frameworks is a business career prep service started by Matt Ting and Patrick Fong, who have each spent several years working in investment banking and private equity in New York and Silicon Valley. Matt and Patrick met at Evercore, a top tier investment bank, and over the years have tutored and coached dozens of candidates to land their dream business job.
Matt Ting: / matthewting
Patrick Fong (HBS 2021): / patrick-fong-0b773041
#PrivateEquity #InvestmentBanking #InterestRates

[@swear11]

Could have used this yesterday. Got asked like 3 LBO / interest rate questions in my superday today 😭

[@PeakFrameworks]

My bad yo, shoulda uploaded a day before 😭

[@AdityaRaj-jd8ib]

Videos like this are immensely helpful in understanding mket conditions and how they tie in with financial technical concepts like WACC. Hope to see more of these in the future, as I feel like you have broadly covered alot of the IB/PE recruiting knowledge in your videos.

[@michael28218]

Thanks so much for the explanation! One question about your first point - how do you define “debt multiple”? I thought debt multiple = net debt / EBITDA, where net debt (ie. ST + LT NBV of debts) would stay the same despite an increase in interest rate but EBITDA would decrease due to a decrease of serviceable debt, so debt multiple would increase instead of decrease when interest rate increases? Also wondering what is your formula for leveraged return of investment. Thanks!

[@Ethan-kl7kx]

What about the affect on the private credit market/the role of PC funds in LBO? Thank you and great vid

[@KeatonStein]

Great video, super helpful

[@qikong7269]

Great video! Thanks for that

[@armitageshanks2499]

Hey Matt, say you bombed on-cycle PE recruiting and you reach the end of your analyst program as an average dude with no jobs lined up. What you gonna do? Do they kick you out after your analyst program? Do you stay for a 3rd year to re-recruit, then they kick you fr?

[@jacobtrevorbush]

Great video.
Are private equity firms usually able to and do they hedge interest rate after they purchase a company?

[@PeakFrameworks]

I haven't seen that too much but a lot of my career was during low interest rate periods. Hedges tend to be expensive.

[@juliencaron3048]

Hey Matt! I had a question for what you think constitutes good/high marks for HBA1. They just dropped for first semester. I was wondering at what average and above does it make sense to bring it up in recruiting?

[@PeakFrameworks]

I got no clue anymore - these things change a lot over time. Back in my day, 85+ was considered decent for finance, so about top quartile of the class. You'd learn more by asking an HBA2.

[@armitageshanks2499]

HBA gang unite

[@tumbostaysolo2012]

queens better😹👎🏽

[@armitageshanks2499]

Lol Matt any chance you changed your mic/ caught a cold or smtg? Your voice is noticeably higher than before

[@PeakFrameworks]

Lmao for real? Nah my voice is the same I think...

[@brominter5921]

Ur trippin

[@bklwealth1132]

Who edits your videos?

[@PeakFrameworks]

Found the homie off Upwork

[@bklwealth1132]

That homie does good work, Matt.

[@kaylaattis2664]

I thought libor no longer exists?

[@PeakFrameworks]

Ah yea LIBOR is dead, people use SOFR now!

[@kaylaattis2664]

@@PeakFrameworks great video by the way

[@seandorje1052]

private equity is a scam