BDO Warned of Potential Financial Market Correction
Consultancy cautions that travel operators and PE-backed firms face headwinds as the exit cycle slows.
Updated on Oct. 6, 2026 in Corporate Finance
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Consultancy BDO warned that travel businesses and private equity firms face an impending market correction following the Federal Reserve’s September interest rate hikes. The shift threatens to disrupt standard exit cycles for investors.
Why it matters
Rising interest rates have increased the cost of debt, hindering the ability of private equity firms to offload assets at target valuations. This trend creates significant liquidity pressure for firms holding long-term investments in a cooling market.
Global private equity firms manage $4.7 trillion in assets, with $3.8 trillion currently tied up in investments reaching a typical seven-year holding period. Meanwhile, the US budget deficit grows by an average of 7% annually, adding to wider systemic debt concerns.
The players
BDO
A global network of public accounting, tax, and advisory firms providing audit and financial consulting to mid-market businesses.
Federal Reserve
The central banking system of the United States responsible for setting monetary policy and interest rates.
Apollo Global Management
A global alternative asset manager specializing in credit, private equity, and real estate investments.
The details
Private equity funds are increasingly attempting to raise cash by moving assets into continuation vehicles to sell to themselves, circumventing the standard exit cycle. However, high equity valuations relative to GDP remain a primary risk factor for investors. Unless AI productivity gains significantly exceed expectations, firms will likely struggle to find buyers for these assets in the current high-interest-rate environment.
Timeline
September 2026: The US Federal Reserve raised interest rates.
2028-2029: The expected timeframe for a potential financial market correction.
Market Landscape
The current economic environment shares structural vulnerabilities with post-World War Two debt-to-GDP levels, particularly in the UK. This creates a challenging backdrop for private equity firms seeking to exit positions while debt costs remain elevated.
Operators should prepare for tighter credit availability as private equity firms shift their focus toward asset retention rather than sales. Business owners should stress-test their balance sheets against persistent high-interest-rate scenarios over the next 24 to 36 months.
The takeaway
The standard private equity exit strategy is currently facing a bottleneck due to the rising cost of debt. Operators should monitor their debt-servicing ratios and explore alternative financing sources before the projected market correction window opens in two to three years.
Further reading
For broader insight into capital structures, see our Corporate Finance section.
Source note: This article includes information reported by Travel Weekly UK.
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