Private Equity has passed through a Golden Age, but will now spend a year or so in "purgatory" before entering an even greater period of expansion, or "Platinum Age," according to David Rubenstein, co-founder and managing director of The Carlyle Group, the Washington, D.C.-based private equity firm with more than $70 billion in assets.
In a keynote address at the 14th annual Wharton Private Equity and Venture Capital Conference titled, "Harnessing the Winds of Change," Rubenstein said the credit crisis triggered by subprime lending has brought the growth of private equity investment to an abrupt halt.
When credit markets dried up, large banks had already committed to $300 billion in private equity deals, Rubenstein noted. About a third of that value stayed on bank balance sheets, although much of it has already been written down, he said. Another third was renegotiated with tougher terms for private equity sponsors. For the final third, the deals were never completed and are now the subject of litigation or break-up fees. "For the next year or so, we will be in purgatory. We will have to atone for our sins a little bit," says Rubenstein. As head of Carlyle, one of the biggest private equity players in America and the world, he also believes that the next wave of private equity will be stronger than ever and will start in early 2009.
In Money Magnet, this theme of the breakdown of the big, public markets and the build up of private equity partnerships as an alternative to the Wall Street and Bay Street is discussed in depth.
"It is becoming more pressing, says Jacoline Loewen, "that private equity managers do a better job of explaining how they can improve companies and deliver strong returns that lead to increased employment and economic expansion overall.