Reasons why the Private Equity Boom Might Not Be at an End

Henny Sender thinks that "some signals" seem to be hinting that this is the beginning of the end of the private-equity party. Well, yes -- but then again, pretty much exactly the same signals were there two years ago, and ended up signaling exactly the opposite.

It's worth noting that there are also some signals pointing in exactly the opposite direction. And rather than being anecdotal, based on public statements from private-equity professionals who have a vested interest in talking down the market, the bullish signals are more quantitative.

For one thing, private equity is clearly booming. $281 billion of private-equity deals have been announced so far this year, triple the level of just one year ago, and there has been $82 billion in announced deals just this month -- a new all-time record, beating April's $78 billion and last November's $81.6 billion.

What's more, as Alphaville notes today, there's still a lot of room for buyouts, with three-fifths of UK chief executives (I'm sure the proportions are much the same in the US) saying they are not open to private buy-outs, and 14% saying that they would never accept an approach of any kind, under any circumstances.

This doesn't make a lot of sense: CEOs of private companies have just as much job security, make more money, have fewer regulatory hassles, and have a longer-term outlook than their public-company counterparts. As more public-company CEOs realize this, we're likely to see more, rather than fewer, privatizations. After all, no private-equity shop likes making a hostile bid: it's much more pleasant for all concerned for the deal to be amicable.