Gryphon Investors correctly identified the risk of unhedged debt but delayed execution for six months due to "perfectionism." This costly mistake underscores that in volatile markets, timely implementation of risk management strategies is more critical than achieving a perfect execution plan.
A staggering 56-58% of middle-market companies brought to market annually for the past three years did not sell, a dramatic increase from the historical average of 10%. This statistic reveals a massive and persistent valuation gap between what sellers expect and what buyers are willing to pay.
When Gryphon's CEO warned Limited Partners in 2022 against planning for a normal fundraising year, about half pushed back. This highlights the significant lag between a General Partner's on-the-ground market read and LP sentiment, demonstrating how difficult it can be to communicate a contrarian view to investors.
The unprecedented 3-4 year drought in private equity liquidity has fundamentally broken traditional Limited Partner models. LPs, who historically planned on a 4-year cash flow cycle for receiving distributions, are now facing an 8-9 year cycle, creating immense pressure on their allocation and return models.