UP UNTIL the 2008 credit crunch, the conventional recipe for success in private equity (PE) was straightforward: Just pour in debt and stir. A generous dose of leverage typically spiced up the financing of a transaction.
But the global financial crisis (GFC) turned this money pie into mush. Government-backed purchases of toxic assets – funded by central bank purchases of government bonds – eventually engineered a comprehensive bailout of distressed borrowers and other heavy debt users. With loose monetary policies throughout the 2010s, leverage returned with a vengeance.
So if a recession comes, how can the lessons of the GFC inform PE practitioners facing a formidable debt wall and stubbornly...
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