PE HUB Wire Highlights, 10.24.19

Blackstone’s Schwarzman defends private equity; LPs concerned about war on PE but don’t know what to do

As the private equity industry tries to defend itself against attacks, and prepares for the bubble to burst, one issue has caused many executives and bankers to balk. That’s the growing use of adjustments in M&A processes.

KPMG recently looked at 1,800 buyouts from 2013 to 2018. More than half of the deals, or 62.7 percent, had pro forma adjustments in 2018. This is up from 56.9 percent in 2013, KPMG said. “We expect their use to continue,” said Joe Hartman, co-head of the private equity practice within KPMG’s deal advisory and strategy group.

This is a big deal. Several executives at PartnerConnect West in September complained about adjustments, particularly adjusted Ebitda. Many think it’s fiction.

Pro forma adjustments can be positive, including items like a new revenue source or expected cost savings. But they can also be negative such as losing a major customer or a union contract. Whatever adjustments firms are taking, or trying to take, their use is expected to grow in M&A deals. Hartman recommends that parties come armed with analytics to back up any sort of adjustments. See my story here.

Hubsters, do you think adjustments are being abused in PE deals? If so, why? What adjustments annoy you or are wrong? Email me at

We’ve been calling on the industry to do a better job of defending itself against negative attacks. Stephen Schwarzman, Blackstone’s CEO, did that yesterday, according to PEI. Schwarzman spoke of the “vital role” Blackstone plays in society and said the firm’s portfolio companies have added more than 100,000 net jobs during its ownership over the past 15 years, the story said. Of BX’s more than 700 control investments during this time, it has seen only one bankruptcy filing and no liquidations.