Private Equity: Ripples of a Fourth Wave

IESE Alumni Magazine No. 130, July-September 2013

4 Pages Posted: 29 Jul 2013 Last revised: 29 Oct 2013

See all articles by Marian W. Moszoro

Marian W. Moszoro

Warsaw School of Economics (SGH); International Monetary Fund (IMF); George Mason University - Department of Economics; George Mason University - Interdisciplinary Center for Economic Science (ICES)

Author

Date Written: July 1, 2013

Abstract

La versión española de este artículo se puede encontrar en: http://ssrn.com/abstract=2302212

The relatively young history of the private equity (PE) industry has been marked to-date by three distinct cycles of booming deal activity ("waves") followed by bust years. After the longest bust period caused by the global financial crisis, the PE industry is invigorating anew, at least in the U.S. Since the beginning of 2013, a number of large PE-backed transactions have been announced. Several trends fuel the apparent fourth wave of PE activity. First of all, quantitative easing is finding its way into the debt markets on the back of aggressive central bank bond-buying globally. Given the environment of record-low interest rates, investors hungry for yield yearn for a new LBO wave that would help satisfy their demand for higher returns. Additionally, the GPs themselves are both motivated buyers and sellers. On one hand, they accumulated about $1 trillion of “dry powder” in the years leading to the crisis, yet have not been able to deploy all that capital, becoming more desperate to put money to work. On the other hand, those who did make investments sit on a backlog of aging assets and are eager to divest them. Finally, there is a chance that the deal market in Europe and in the U.S. will also be invigorated by capital from other parts of the globe, in particular from China and Japan.

Keywords: Business Cycles, Private Equity, Buyouts, Mergers & Acquisitions

JEL Classification: E32, G24, G34

Suggested Citation

Moszoro, Marian W. and A, A, Private Equity: Ripples of a Fourth Wave (July 1, 2013). IESE Alumni Magazine No. 130, July-September 2013, Available at SSRN: https://ssrn.com/abstract=2302210

Marian W. Moszoro (Contact Author)

Warsaw School of Economics (SGH) ( email )

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States

HOME PAGE: http://economics.gmu.edu/people/mmoszoro

George Mason University - Interdisciplinary Center for Economic Science (ICES) ( email )

400P Truland Building
George Mason University
Fairfax, VA 22030
United States

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