The Private Equity Overhang

The Alliance of Mergers & Acquisitions Advisors and PitchBook Data recently released a study of the private equity industry. The study showed that there is an overhang of approximately $400 billion in private equity fundraising. That means private equity firms have raised about $400 billion more than they have invested. There's a lot of money out there waiting to be invested. In fact, it's at an all-time high.

As tough as times have been, people have continued to give their money to private equity funds. The funds just haven't found companies that they consider good investments. So what needs to happen? According to some, it's a matter of companies lowering their expectations. Companies can no longer expect to get the kind of multiples or the kind of leverage that were used before 2007. Others say it's all about the stability of the economy and the re-opening of the credit markets. Still others say that investors need to change the way they do diligence on a company. The old methods will no longer work in light of the current economic realities.