The Booms and Busts of Private Equity - A study of the drivers and components of private equity cycles

Sammanfattning: In this paper we study the drivers behind private equity cycles. The data consists of 107 282 deals made by 7 296 firms. We hypothesize that activity in the private equity industry is driven by economic shocks, capital supply and demand, as well as market timing, information asymmetries, and agency conflicts. As the drivers cannot be measured directly we use several proxies to regress against deal activity. Results indicate that aggregate activity in the private equity industry is mainly driven by economic shocks and previous performance/agency factors. Increases in activity are primarily made up of larger deals, and more frequent deals by already established private equity firms. New entrants explain less, but comparatively more for venture capital than for buyout.