Tags: Davidoff | private | equity | wane

Prof. Steve Davidoff: Private Equity on the Wane

By Dan Weil   |  

All the hue and cry about private equity in the presidential election campaign neglects a little-publicized fact – the industry is in retreat.

Private equity accounted for 7 percent of total global takeover volume in 2011, down from more than 18 percent in 2007, before the financial crisis, according to research firm Dealogic.

And the outlook going forward isn’t pretty, Steven Davidoff, a finance professor at Ohio State University, writes in The New York Times. “If private equity’s recovery from the financial crisis has been fitful, its future looks uncertain.”

Editor's Note: Obama Donor Banned This Video But You Can Watch it Here

Private equity firms have too much money to invest, he maintains. Their cash coffers totaled $900 billion at the end of 2011.

At current takeover rates, it would take almost a decade to invest that money, Davidoff says. But deals have become expensive, making them difficult to execute.

“This is not to say that private equity deals are not being done, just that the industry is primed for a shakeout,” he writes. “For the future barons of private equity, this means a world where they have less impact. Deals will be smaller.”

Ironically enough, President Barack Obama’s recent attack on private equity may represent an opportunity for the industry, writes Reuters Breaking Views columnist Jeffrey Goldfarb.

“By firing the opening shot, Obama has given private equity firms the opportunity [to explain their business]. If they can capitalize on it, they’ll owe him a debt of gratitude,” Goldfarb writes.

Editor's Note: Obama Donor Banned This Video But You Can Watch it Here




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