Private Equity's Public Distress

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In 2008, the private equity industry faced its most severe crisis, revealing the sector's secretive nature and lack of public understanding. Managing trillions in debt and equity, private equity firms own thousands of companies and play a significant role in corporate acquisitions. This raises questions about why such sophisticated investors failed to foresee the Credit Crunch or, if they did, why they didn't take preventive measures to protect their investors' capital. With a pressing need for clarity, this account explores the practices of leveraged buyout (LBO) funds over the past decade. It delves into concepts like stapled financing, public-to-privates, and covenant-lite debt, illustrating how private equity faced a mid-life crisis. The story of Candover, one of the oldest and largest private equity firms, highlights its struggle to adapt to a changing landscape, straying from its core competencies and market. The narrative tracks the LBO sector's evolution from 1980 to Candover's downfall in December 2010, showcasing its transformation into a global industry. Once a revered institution, Candover became a casualty of the Credit Crunch due to investment missteps and governance issues, compounded by a competitive environment and the industry's largest bubble. This book examines how it all went wrong and offers insights into the future of a sector that has lost credibility amid financial turmoil.