Just two years ago, even successful private equity firms were jumping through hoops to keep investors happy. Now, bombarded with offers of money for their latest funds, top-performing firms are turning the tables.

In the last year, buyout firms including Advent International, EQT Partners and BC Partners have demanded -- and got -- better terms from their backers. With a combined fundraising total of $25 billion, the changes could be worth tens of millions to partners at the firms.

Some want to take more fees, like an extra five percent of profits on asset sales. Some have asked backers to drop the minimum rate of return, known as the hurdle. Others want to take a share of profits, known as carry, on a deal-by-deal basis instead of waiting for the fund to close. That can help them link pay to performance and reward teams for successful deals -- a system known as eat what you kill.

Investors, whose money usually affords the ability to prevent such changes, are not only allowing such terms, they’re writing bigger checks to the managers demanding them. Lesser firms, meanwhile, are being ignored.

The number of firms successfully raising capital fell by 20 percent from 241 in 2013 to 194 in 2015, according to data compiled by Bloomberg. Meanwhile, overall capital committed to buyout funds rose 18 percent to $249 billion last year from $211 billion in 2013.

“The industry is going through a wave of top managers being able to demand better terms from investors, whether it’s how they split the profit, how much they decide to charge or what kind of hurdle rate they offer,” Erik Gordon, a professor at the University of Michigan’s Ross School of Business who studies private equity, said in an interview.

Potential backers don’t have much choice. Interest rates are still close to historic lows, so the high returns that are more likely to come from top performers are particularly attractive.

European Waterfall

Paying a percentage of profits from the sale of companies to individuals that worked on those deals -- the eat-what-you-kill model -- is difficult to achieve under the terms of many funds. Often, profits will be shared later in the pool’s life, sometimes years after it was raised.

To get round this practice, known as the European waterfall, buyout firms including EQT are asking investors to treat each deal separately. This allows them to divvy up proceeds as soon as the deal is completed, and distribute them to the people that managed the sale.