Around two years ago private equity companies spent around £100b buying up assets around the world. But today, it is estimated that over two thousand private equity companies have raised around £300b to fund their continuing spending spree. What’s more, since private equity firms like to supplement every pound of investor money with another £4 of debt, they may have over a trillion pounds waiting to unleash on global markets.
The size of private equity companies’ wallets has now grown to such an extent that it is causing brows to furrow at the Financial Services Authority (FSA). In particular the securities regulator said the default of a large private equity company or cluster of smaller private equity firms seems inevitable. Consequently, it is worried about the negative implication that this could have on orderly markets. What’s more, the FSA said in extreme circumstances this might impact the financial stability of the UK’s markets….