Tags: private | equity | stall

Post-Boom, Private Equity Stalls, Changes Mission

By Dan Weil   |   Friday, 31 Jul 2009 01:15 PM

Private equity activity hasn’t rebounded from the financial crisis, as major buyout firms are still absorbing the purchases they made during the boom years of 2004 through 2007.

In the first half of the year only $24 billion of private equity deals were transacted around the world, according to Dealogic.

That’s a mere pittance compared to $131 billion last year and the whopping $528 billion total for 2007.

The stall comes despite the fact that the stock market has jumped more than 40 percent over the past four months.

It also comes in the face of private equity firms holding $400 million that has been raised but not invested, according to research firm PitchBook, Fortune magazine reports.

"The business has changed radically," John Howard, head of Irving Place Capital, the former Bear Stearns merchant banking unit, told the magazine.

"What was essentially a business of creating financial options is becoming more concerned with growth and enhancing profitability."

Many companies bought by private equity firms are laden with debt, leaving the firms with a lot of restructuring work.

"The environment has changed, and the holding period is expected to be a lot longer," James Quella of private equity firm Blackstone tells Fortune.

The changing nature of the industry is leading private equity firms to seek new leaders.

Firms realize “the strategies … needed to run their businesses in this economy are different from what was needed in the past,” Abby Adlerman of headhunter Russell Reynolds said in a company release.

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