By Michael Roberts

The boom in private markets since the 2007-2009 financial crisis has been huge, mainly relying on very low interest rates to rack up debt on the companies purchased. After central banks around the world slashed interest rates to near zero in response to the 2008- 009 financial crisis, private equity embarked on its longest and most powerful boom. In 2021, the market’s zenith, a record $1.2tn in deals were struck, according to PitchBook data.

Economic slumps provide fresh blood for these vampires as small companies struggle in recessions. In 2008-9 slump and in the pandemic slump, private equity firms announced ‘approaches’ to more than twice as many listed companies as they had ever done previously. And private equity company, Bain Capital’s managing partner John Connaughton commented: ‘One of the most productive periods for us was after the global financial crisis.”

But now a series of rapid interest rate rises since 2022 has dried up much of the fresh blood that vampire PE funds need and many private-equity-backed companies are saddled with large debts and face much higher interest costs. Default rates are picking up and lenders are increasingly taking control of creditor companies at the expense of equity owners. 

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Over the last two decades, the vampires of private equity have gorged themselves on the profits of labour in the companies they have sweated, while avoiding sharing those profits with their investors or with governments through taxation. They engage in various forms of ‘financial engineering’ to increase their gains. And in doing so, they have leveraged key sectors of the economy into huge debt, at the expense of productive investment. Now rising debt servicing costs are adding to the risk of a major financial crash, acting as a stake through the heart of many of these vampires.