Private equity titans make profits that sometimes seem obscene. Does the timing of those profits matter though? A financial sponsor typically realises profits on a leveraged buyout (LBO) when a portfolio company is sold after years of ownership. But sometimes the waiting is the hardest part.

Benign credit markets are allowing some private equity firms to pay out dividends by having their companies borrow more money in the middle of the holding period. Sometimes these dividends can allow original equity investment to be salvaged within just a couple of years of the original buyout. But dividends can alter the incentives of private equity firms, which then may care less about a company from which it has already mined cash.

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