Shares in U.S. private equity giant Blackstone (BX) were lower today on fears that the sector is putting brakes on deals in Trump’s new America.
Focus on Existing Firms
Although deals are still getting over the line such as KKR & Co (KKR) today snapping up German IT services provider Datagroup, PE firms are increasingly pausing dealmaking and focusing instead on managing their existing portfolio companies.
This includes helping them cope with issues such as altering supply chain routes given the tariff hikes on China and other countries.
Indeed, according to an article in the Financial Times, the reason for the overall deal uncertainty can be placed at the door of Trump’s tariff strategy.
The confusion and volatility caused by the tariffs, as well as the risk of a global trade war and recession, is, one PE boss told the FT making it harder to “price things.” The head of a large U.K. firm told the paper: “People are worried a recession is coming. Private equity will go really risk off for a while.”
The FT cites some recent postponed deals such as the £600 million auction by British firm 3i of its portfolio company Audley Travel and deadlines for final bids for Boeing’s navigation units being pushed back several times.
Trump Boost Busted
This is all despite the sector facing huge pressure from investors to use the large war-chests of funds they have built up over the last few years, as well as selling ageing companies already in their control and returning cash.
What makes this even more frustrating for an industry which has only recently emerged from a world of high interest rates making some deals too expensive, is that it was so unexpected.
Hopes were high in the sector that a business-friendly President Trump would create an environment which would see a wave of mergers and acquisitions being unleashed.
Instead, Trump has been more focused on delivering, what he sees at least, as long-term gains for the U.S. economy through his tariff push, rather than any short-term wins.
Is BX a Good Stock to Buy Now?
On TipRanks, BX has a Moderate Buy consensus based on 9 Buy and 8 Hold ratings. Its highest price target is $207. BX stock’s consensus price target is $158.50 implying an 18.69% upside.
