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Illustration: Aïda Amer/Axios

Private equity is mimicking venture capital, banking on revenue growth instead of cost-cutting.

Why it matters: PE firms may struggle to maintain historical returns, particularly if the bull market slows its rampage and they're stuck with overpriced and overleveraged portfolios.

Driving the news: Bain & Co. this morning released its annual private equity report, highlighting how private equity has been paying dizzying prices:

  • U.S. buyout multiples last year averaged 11.4x EBITDA, a record.
  • A majority of U.S. leveraged buyouts last year were done above 7x debt-to-EBITDA ratios, also a record.
  • Some of this is driven by tech, which keeps seeing its sector-leading deal share increase.
  • Per Bain & Co: "The simple math says that GPs buying companies at these prices will have to generate more value if they are to make good on return expectations — and they will have to do so in a highly volatile and uncertain business environment. A Bain analysis of hundreds of funds in which we co-invest shows that multiple expansion and revenue growth (not margin improvement) are by far the biggest drivers of PE returns."

But, but, but: Private equity would be quick to remind us that a bear market would mean new buying opportunities and that bondholders were mostly happy to amend-and-extend the last time things went bad.

The bottom line: When everything is going up and to the right, a venture-like returns model for private equity can work. But when things slow, PE investors may quickly remember why their VC peers are loathe to leverage portfolio companies.

Go deeper

2 hours ago - Sports

The new faces of NBC's Olympics coverage

Photo illustration: Aïda Amer/Axios. Photo: Cy Cyr/PGA Tour via Getty Images

A new(ish) face will be leading NBCUniversal's prime-time coverage of the 2021 Tokyo Olympic Games: veteran sportscaster Mike Tirico.

Why it matters: It's Tirico's first run as prime-time host for the Summer Olympics. Legendary broadcaster Bob Costas hosted 12 Olympic Games between 1988 and 2016 for NBC before handing over the prime-time spot to Tirico in 2018.

Ina Fried, author of Login
2 hours ago - Sports

Behind the scenes at the COVID Olympics

Photo illustration: Brendan Lynch/Axios, Photo: Steph Chambers/Getty Images

TOKYO — The COVID rule-breaking was obvious at Friday's opening ceremony, when athletes were clearly visible on TV with masks below their noses, but an athlete tells Axios that the rule-breaking has been going on well before that.

  • It's been happening at least since athletes arrived in the Olympic Village, where masks were dropped below noses and different teams were forced to share buses.
2 hours ago - Sports

Axios AM Deep Dive: The Covid Olympics

Illustration: Annelise Capossela/Axios

Welcome to our Axios AM Deep Dive behind the scenes of the Tokyo Olympics detailing the impact of the COVID pandemic, led by Ina Fried, who's on the ground in Tokyo, plus Kendall Baker, who's covering the Games every day in his Axios Sports newsletter.