Title: The Curious Case of Circular Deals in Private Equity - A Closer Look at the 'Rot' within the Industry
The world of private equity has been rocked by recent revelations that buyout firms have resorted to circular deals, selling companies they own back to themselves. This practice, known as "circular dealings," is a workaround for struggling firms who are unable to sell their assets on the open market and instead seek cash returns from clients through this unconventional method.
Historically, private equity has been an attractive investment option due to its potential for high returns and strategic control over companies. However, with recent economic downturns and increased competition in the industry, many firms have found themselves unable to sell their investments at a profit or even break-even point. This has led them down a path of circular dealings as they attempt to recoup losses while maintaining appearances for investors.
The implications of this trend are far-reaching and could potentially lead to significant consequences within the industry if left unchecked. For one, it undermines the very foundation upon which private equity was built - the ability to buy, improve, and sell companies at a profit. By engaging in circular dealings, firms risk damaging their reputations as well-informed investors capable of making sound decisions about when to exit an investment.
Moreover, this practice may also have legal implications for both buyers and sellers involved in such transactions. Regulatory bodies might scrutinize these deals more closely due to concerns over potential conflicts of interest or fraudulent activities. This could result in increased oversight and stricter regulations being imposed on the industry as a whole.
From my perspective, this development signifies a troubling trend within private equity that warrants further investigation and discussion among stakeholders. While it may be tempting for firms to resort to circular dealings as a quick fix solution during tough times, doing so ultimately undermines trust in the industry and sets a dangerous precedent for future transactions.
In conclusion, while circular deals might seem like an innovative way for private equity firms to navigate through challenging economic conditions, they pose significant risks both to investors and the integrity of the industry itself. It is crucial that all parties involved take a step back and reassess their strategies before resorting to such unconventional methods in order to preserve the long-term viability of this once thriving investment sector.
Source: [Original Article](https://www.nytimes.com/2025/12/24/business/private-equity-continuation-funds.html) #investors
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