The 60% Plunge In Private Equity Deal Flow
If there is one sector that is really hurting despite the outperformance of all other asset classes (money being thrown at equities, bonds, and commodities without regard or prudence as Rosenberg has pointed out), it is private equity. Indeed, while credit has thawed in general, investors are still completely shutting out the 5x+ leverage transaction world: the bread and butter of the LBO business model. For a sober look at the desolation in the PE landscape, even as funds rush to raise more billions in dry equity powder which sits at banks collecting 1%, consider that YTD only $33 billion in 654 PE deals has been disclosed, a 60% drop from the 1,532 deals done through Q3 in 2008, and N/M when compared to the heady days of 2007.
From PitchBook Data:
The most recent quarter saw not only fewer deals done - 201 were closed - but also much smaller deals in size, totalling just $7 billion in disclosed deal amounts. These results continue the downward trend initiated almost 2 years ago.
Yet free Fed liquidity apparently seems to be only available only to the To Big To Fail recipients of taxpayer generosity: even as LBO firms have raised over $75 billion in new equity, they have put less than a half of that to work. As mom and pops apparently are unable to fund the financing commitment for TXU-like repeats with direct deposits from their 401(k)'s, the dormancy in the PE space will likely last until such time as Obama manages to fully reignite the housing bubble, which by modest estimates should be in about 2 weeks. There are mid-term elections to think about.