Delayed Disaster

I was on New England Cable News last night, to discuss the recent market troubles and the Dow Jones deal. You can get the video here.

One issue related to that appearance, upon reflection, is that PE funds and hedge funds are getting painted with a singular brush. It’s a big mistake, and not just from a technical perspective. The hedge funds collapses at Bear Stearns, Sowood, etc. will not happen to private equity funds. After all, it’s the hedge funds that scooped up all the questionable debt from private equity deals.

PE firms, on the other hand, will be mostly fine in the short-term. Maybe they’ll have to work harder to close deals and find leverage for new ones (and in some cases find equity), but the real trouble comes in 2-5 years, when PE firms begin trying to exit the companies they bought at inflated valuations over the past 12 months. Consider it a case of delayed disaster.

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