Is it Time For Private Equity To Finally Freak Out?
In the last month or so, coverage of private equity has gone from cautious to murky to bearish to downright apocalyptic. The descent has been so rapid, in fact, that it's almost rendered Michael Wolff's recent Vanity Fair article on private equity MOA (moot on arrival). His piece, titled "The Ultimate Bubble," asks the question on everyone's mind: Is private equity doomed, to what extent and which specific people or firms? Wolfe nails it when he says: "Chances are that what you're doing with your idle hours as a PE man is trying to figure out who deserves to crash and burn before you." (We at peHUB have our money on Apollo going down first, among the big boys) He makes the point that PE hasn't crashed yet, because we've yet to see much blood in the water, and that's partly because you all are so damn private. But in the time between his writing the article and it going to press, some of his arguments against a PE crash have now come to fruition! For example, he says, at least PE firms haven't given money back yet. TPG did so last week. He says PE firms haven't announced any layoffs. Enter Blackstone, Carlyle, American Capital, AIG, and probably others we don't know about. Add that to last week's dubious BCG study predicting almost half of all PE firms could cease to exist in the coming years. The study was met with a sneer (slightly from me, largely from commenters), yet the idea isn't that far-fetched. Both Wolff and BCG touch on a topic that may have started months ago as nervous whispers but has amplified to a worried roar and will only snowball in the new year: Private equity firms are in trouble. So in 2009, expect to defend your industry and reason to exist. There are a laundry list of things working against you right now. For his part, Wolff blasts PE for pretending to know how to
