Private Equity's $12 Billion Self-Dealing Problem

The private equity industry has a common remedy for mature portfolio companies that struggle to attract outside buyers: sell them to another buyout fund, frequently one managed by the same firm. A Bloomberg article uses the dispute surrounding Recordati SpA to illustrate how that approach can become contentious, with European buyout firm CVC Capital Partners Plc as the central example.

CVC's Fund VII holds a 47% stake in Recordati, the Milan-listed drugmaker, following a 2018 transaction with the company's founding family. According to the article, the investment has performed well, but a clean exit has proved elusive. Bloomberg News reported that there were sale talks in 2024, though no formal transaction materialized.

The Recordati case highlights the structural tension inherent in such arrangements. When a fund seeks to exit an asset and the buyer is a sister vehicle under the same management, questions arise about pricing, conflicts of interest and whether limited partners are receiving a fair outcome. The headline of the original piece frames the broader issue as a $12 billion self-dealing problem, though the primary source excerpt available here does not provide a detailed breakdown of that figure.

For institutional investors, the episode underscores the liquidity and governance considerations that accompany single-asset or concentrated stakes held over extended periods, and the scrutiny that intra-firm secondary transactions can attract.