The Rise of Private Equity

The sharp rise in the number of private equity deals has prompted the Reserve Bank of Australia (RBA) to warn about the potential threats that leveraged buyouts pose to the nation's economic stability. Private equity deals in Australia totalled $27 billion in 2006, $12 billion above the previous five-year average. The RBA warned that as leveraged buyouts usually increased a company's debt ratio, it became more vulnerable to changes in economic conditions. However, the bank noted that the surge in activity was not currently endangering the continuing expansion of the economy.