Private Equity Fundraising Divide Pushes Newcomers Toward AI

[The Information] Private equity fundraising has split between haves and have-nots, as a prolonged slump in sales and IPOs of portfolio companies leaves investors with less cash for new funds. Giants such as Blackstone are still pulling in capital while some smaller firms struggle to attract investors, pushing newcomers to find ways to stand out, including betting on AI to transform companies and boost returns. Aldaron, a 12-person firm that calls itself a "transformation equity firm," uses an in-house engineering team to deploy AI at companies it acquires, emphasizing growth without job cuts. Co-founder Evan Mendez said "the core message that resonated with people is this transformation equity story." Aldaron completed its first acquisition in March, buying a majority stake in Oak Point Partners, and closed its first fund in October with $884 million from outside investors and more than $950 million including coinvestments, Mendez said. According to an August PitchBook report, private equity firms hold nearly 4,600 U.S. companies owned for at least five years, longer than the typical three- to five-year holding period. Mitchell Mansfield, a managing director at Kroll, said many managers are expected to exit the market as fundraising becomes more challenging.