Private Equity Has a Problem

The private equity (PE) industry has been all the rage over the past 10 years.

Why? Interest rates.

Despite approaching 3% briefly in 2018, the US 10-year treasury has hovered around 2% since 2013.

However, that’s changing—and with that comes a change in the fortunes of the leveraged buyout (LBO) industry.

There are three “inputs” to make the sausage of an LBO:

1. The target or the deal

2. The price

3. The financing

Right now, there are plenty of deals to be had—that’s all well and good—and prices aren’t crazy high either.

But therein lies a problem in the third ingredient: financing.