ARTICLE · 06 APRIL 2009

Private Equity - A Perfect Storm

Norton Rose Fulbright South Africa

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Private equity firms have enjoyed extraordinary growth and returns over the last five years, but the collapse of the world's debt markets and the deepening economic crisis have brought this boom to an abrupt end, with potentially severe consequences for private equity firms, the companies they own (so-called portfolio companies), and the real economy.

South AfricaFinance and Banking

Loris Rech

Private equity firms have enjoyed extraordinary growth and returns over the last five years, but the collapse of the world's debt markets and the deepening economic crisis have brought this boom to an abrupt end, with potentially severe consequences for private equity firms, the companies they own (so-called portfolio companies), and the real economy.

Research from the Boston Consulting Group and the IESE Business School indicates that at least 20% and possibly as many as 40% of the 100 largest leveraged-buyout (LBO) private-equity firms could go out of business within 2 to 3 years. Disturbingly, most private-equity firms' portfolio companies are expected to default on their debts, which are estimated at about USD1billion.

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