NEW YORK (Fortune) — If the credit markets have been an iceberg over the past year, the private equity business has been frozen as solid as a prehistoric glacier. Buyout giants like KKR, Blackstone, and Bain Capital — who just a couple of years ago were vying to one-up each other on a monthly basis with new mega-deals — have been in a virtual hibernation for months.
In the first half of 2009, just $24 billion in deals were completed globally. That compares to $131 billion last year and an astounding $528 billion in deal volume in 2007. This year’s first-half total is the lowest since 1996, when the buyout industry was much smaller. There were only three loans extended to fund leveraged buyouts through June, the fewest number since 1985 according to Dealogic.
In recent weeks, though, the stock market has begun to rally and the cost of borrowing has begun to fall. So it’s natural to wonder: Is the buyout market about to heat up again?
Don’t be on it, say industry insiders. Private equity is still in the early stages of a long thaw.
Digesting last cycle’s deals
The problem is not that firms don’t have money to spend. In fact, according to private equity research firm PitchBook, the industry is sitting on an estimated $400 billion worth of so-called dry powder, or money raised but not yet invested.
No, the reason that dealmaking isn’t going to come roaring back is that private-equity firms are simply still too busy trying to digest the companies they swallowed during the boom years.
Why Private Equity Is in a Deep Freeze – Telis Demos, Fortune
