TEXAS CONTRACT MANUFACTURING GROUP
Private equity has long been known for chasing speed. The traditional model relied on leverage, financial engineering, and quick exits. That formula is looking less reliable today. Rising interest rates, inflationary pressure, and geopolitical uncertainty are reshaping the dealmaking landscape. The firms that succeed in this environment are the ones that can design deals for durability, not just returns on paper.
High-leverage strategies thrived in an era of cheap money. That era is gone. The cost of debt is higher, liquidity is tighter, and businesses that were once able to refinance easily are now feeling the strain. For many portfolio companies, rigid capital structures have become liabilities rather than tools for growth.
Markets no longer reward short-term arbitrage. They reward firms that can keep companies stable through cycles, while leaving enough flexibility to invest in growth when conditions improve. That shift is redefining what it means to be a “smart” private equity sponsor.
In place of one-size-fits-all models, investors are turning to adaptive capital structures. These often blend conservative debt ratios with equity incentives for management, or introduce earn-outs tied to real performance rather than lofty forecasts. The goal is not just to close the deal but to give operating teams the breathing room to execute in unpredictable environments.
This approach also demands more operational involvement. Sponsors are not only structuring capital differently; they are underwriting with execution in mind. That might mean planning for system upgrades, supply chain disruptions, or the cost of scaling a workforce before a letter of intent is even signed.
Camwood Capital Group, based in Texas, is one firm leaning into this shift. Its investment philosophy centers on structuring deals that can withstand volatility while giving management the flexibility to grow. In practice, that means keeping leverage at conservative levels, incorporating performance-based earn-outs, and tailoring each capital stack to the realities of the business.
At Texas Contract Manufacturing Group, a Camwood portfolio platform, financial architecture has been closely tied to operational throughput. Growth investments have been paired with capital structures designed to absorb long lead times and cyclical demand. This alignment between capital and execution reflects Camwood’s broader thesis: resilience comes from designing deals around how businesses actually operate.
The middle market will be a proving ground for this new playbook. These companies are large enough to attract private equity interest but often lack the resources to navigate turbulence on their own. Capital structures that prioritize flexibility, patience, and operational alignment will be the difference between portfolios that weather the storm and those that do not.
Private equity is not abandoning the pursuit of returns. But in today’s environment, the firms that build for resilience are the ones most likely to deliver them.
