The party is over. The model is broken. Private equity is dead.

A pessimistic story about private equity. The comment is from an insider who seems to be the type who loaded up with debt and flipped his companies. Good riddance to that model of doing business. There will always be sensible business people willing to invest their money and take the risk to grow the business with the management team.

Here's the full story.

'The party is over. The model is broken. Private equity is dead.' Not the ramblings of some rabid trade unionist or overpaid City scribbler but the judgment of one of the industry's consummate deal makers over dinner last week. He may have fronted some of private equity's highest profile deals over the past decade but my acquaintance was blunt about the prospects for the industry (which, by the way, has helped him amass a small fortune). His advice to an ambitious twentysomething hoping to play with other people's money? Look to the public markets. It will be quoted investment vehicles that do the mega deals of the next decade (and make fortunes for their promoters). The future is stock market paper not the double digit leverage that private equity is so addicted to.

The cracks in the private equity model are increasingly evident – witness the recent boardroom bust up at Alchemy – but are the prospects for the industry really as dire as my dinner companion claimed?

Having gorged on cheap credit, private equity is undoubtedly struggling to adapt to life in the post credit crunch era. Lacking the magic ingredient that is leverage, the likes of Permira, Cinven and CVC are struggling to find deals that will deliver the super-returns they have promised their investors. They have commitments from their backers to invest hundreds of millions of pounds but no deals: a state of affairs that leaves investors restless and private equity's star financiers frustrated.

Lack of deals is not the only challenge facing the private equity industry. With the financial world in turmoil there has also been a drought of buyers for businesses that have been given the private equity makeover.But, with stock markets rising again, the industry is once more testing investors' appetite for their investments. US private equity groups have floated a number of businesses in recent months and, as my colleagues reveal today, here in the UK retailer New Look may well be one of the first out of the stalls. Many expect AA and Saga owner Acromas to follow shortly after.

But it could be a tough sell. Private equity's quoted cast-offs have, on the whole, done poorly in recent years, underperforming the wider market. Jessops is a case in point. ABN Amro's private equity arm did very nicely, thank you, when it floated it at 155p in 2004, banking a 43pc return. Five years later Jessops is a penny stock trading at 2.2p. The company is in debt- restructuring talks and the board has warned that "it is unlikely that any value will be attributed to shareholders". Hardly the best advert for private equity floats.