Why I am not investing in a buyout for a long time to come

SINCE the financial crisis of 2007-2008, buyouts have benefited from the gift of virtually free money. Lower and lower rates have bailed out poor investments and made good ones into home runs.

Along the way, leverage ratios of acquired companies rose. Reasonable loan covenants and restrictions were eroded and in some cases disappeared. Prices for buyout assets soared.

The definition of the earnings benchmark to justify them – usually earnings before interest, tax, depreciation and amortisation – has been adjusted to a myriad of forms to flatter valuations. Will current rates cause this whole tottering edifice of debt to crash?