Sunday , December 15 2019
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Private equity run amok

Summary:
This is a guest post by Daniel Rasmussen and Brian Chingono, partners of Verdad Advisers, a hedge fund focused on leveraged small value public equities, arguing private equity no longer offers investors a good deal.  Private equity’s historical success in the 1980s and 1990s came from using debt to buy small companies in a private market at valuations that were significantly discounted relative to public equity markets. That is no longer the case.Today, the average private equity company is bought at a 12x multiple of earnings before interest, taxes, depreciation, and amortisation (Ebitda). Rather than being undervalued, this is in line with the S&P 500. Private equity valuations/ S&P 500 valuations © S&P Capital IQ and Pitchbook (June 2019) While private equity is no longer

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