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22 Dec 2006Research & Ideas

What’s Behind the Private Equity Boom?

by Jim Aisner

Podcast: On just one day in November, $52 billion worth of private equity deals were announced, and more than $200 billion worth of deals have been agreed to so far in 2006. The deals include such major names as Qantas ($8.7 billion), Hertz ($15 billion), and Clear Channel ($ 18.7 billion). Are public markets being eclipsed? Are investors and employees being victimized? Professor Josh Lerner looks at historical trends and current deals to put it all in perspective. Key concepts include:

An influx of money on the equity side from pension funds and overseas investors is helping create an explosion of LBOs.
Hedge funds have joined banks as major providers of debt, creating a market with more favorable terms for investors.
Although there have been deals that have gone sour, the private equity boom can be seen as mostly beneficial for both investors and the companies involved.

Podcast with: Josh Lerner
Interviewer: James Aisner
Running Time: 15 min., 56 sec.