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Private Equity In 2015 - An Eye On The Blackstone Group

With annual forecasts and predictions for 2015 flooding out at a feverish pace, the concern around the costs of acquisitions and degrees of leverage being employed by the major private equity players has been the most notable. Buoyant market valuations translate to significant profits for the Private Equity sector as it exits portfolio companies. However, this same dynamic raises concerns for the sector as it reinvests its capital at these same heightened valuations while the companies it is exiting were acquired during a period of severe financial distress, which made acquisitions quite cheap at the time. Concurrently, Private Equity is leveraged to the hilt, therefore operating cash flows will undoubtedly struggle to meet repayment schedules in the event there is a downturn in the economy. The leverage ratios and acquisition multiples being paid are assuming continued economic recovery and not leaving any room for a downturn, let alone a significant one. The king of publicly-traded private equity firms is the Blackstone Group (NYSE:BX). These concerns are apparently being priced into the stock as you can see…