It takes a certain, shall we say a more stalwart, kind of a person to willingly endure a second showing of certain movies some find unsettling. Deliverance, The Silence of the Lambs and Taxi Driver all come to mind. So too does Apocalypse Now, one of the most stunning cinematographic accomplishments of the 20th Century but also one of the most disturbing. Thus the renewed “Horror!” when Francis Ford Coppola endeavored to remake this classic for the 21st Century, and in the process 49 additional minutes for fans’ viewing pleasure.
But something, perhaps to critics’ surprise, rose from the cutting room floor. An even better film emerged. In the words of legendary film connoisseur Roger Ebert, it was “more clear than ever that Francis Ford Coppola’s ‘Apocalypse Now’ is one of the great films of all time.” The majesty of Redux stemmed from Coppola and his longtime editor Walter Murch’s approach to the new version. They conceived the May 2011 movie from scratch, using the original dailies, as if the first movie had never been made.
There is now another possible 21st Century remake on another cutting room floor, the trading floor, that is. With this potential remake comes a question that no doubt haunts today’s investors: Are the markets capable of producing an equally miraculous encore? Determining markets’ fate largely comes down to their overlords, the kingpins of private equity. At its most simplistic, a central bank is considered to be the lender of last resort, if circumstances should force that outcome. The mirror image is private equity and the role it can play as buyer of last resort when cycles are nearing their denouement.
It’s safe to say that the chronological moment of truth is upon us as April crosses the line in the sand making the current stock market rally the second longest in history, trailing only that which creschendoed in March of 2000. Last year at this time, the list of rally-rousers was appreciably longer. Sovereign wealth funds were not in liquidation mode defending their countries’ fiscal wellbeing. The initial public offering market was still wide open for business. Unicorn funding was still making believers out of California dreamers. And central bankers’ actions held sway over animal spirits for longer than a few trading days.
But those halcyon days have come and gone leaving in their wake sidelined skeptics at just about every turn, including private equity insiders faced with a forecast that calls for a perfect economic storm. There is, however, one mammoth impediment to private equity joining other would-be buyers who are now in self-imposed holding patterns: money, and lots of it.
In private equity parlance, this ‘money’ is actually capital their investors, known as limited partners (LPs), have committed to invest through funds that have been raised. Those in the business refer to it as ‘dry powder,’ as in readily deployable weaponry to wage war on the acquisition front.
A fresh off the press report by the global consultancy Bain & Co details the year ahead for the private equity industry. The comprehensive study first looks back to 2015, which would have been one for the record books if not for its predecessor.
