Arctos flags rise in private equity zombies as firm count starts to decline

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Private equity zombie rise

Highlights

Arctos Partners CEO Ian Charles reports that the number of active private markets firms began declining after peaking 18 months ago.
Arctos notes a contraction in its database of firms that raised capital in the last seven years, signaling growing difficulties in new fundraising.
A rising share of so-called zombie firms and increased selectivity among investors indicate the private equity sector is entering a consolidation phase.

Fundraising strain emerges in private markets

As reported by Bloomberg, Arctos Partners Chief Executive Officer Ian Charles says the number of active private markets firms has started to fall as a growing share of managers cannot raise their next fund.

Charles says the count of active firms peaked 18 months ago. He adds that Arctos tracks firms that have raised money in the last seven years, and that database is now contracting for the first time.

The comments come from an interview at the Bloomberg Invest conference in Dallas. Charles links the decline in active firm numbers to the rise of so-called zombies, firms that remain in existence but are unable to secure fresh capital for a new vehicle.

Industry implications for private equity managers

The trend suggests fundraising pressure is intensifying across private markets, with weaker firms at greater risk of losing relevance as investors become more selective. A shrinking population of active managers can also signal tougher competition for commitments and a more challenging operating backdrop for smaller or less established firms.

Arctos itself is part of a changing industry landscape after being acquired by KKR & Co. earlier this year. That backdrop adds to the significance of its dataset, which Charles uses to argue that the private markets sector is moving beyond its expansion phase into a period of consolidation.

Our earlier report on private capital consolidation showed how fundraising pressure and slower exits are pushing managers to build bigger, more diversified platforms. We highlighted EQT’s planned acquisition of Stockbridge, following its Coller Capital deal, as an example of large firms expanding scale and strategy to stay competitive as smaller players face tougher conditions.

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