Rate Hike Coming? A Look Back at Debt/Equity Levels in PE Deals
September 17, 2015
All eyes will be on the Federal Open Market Committee meeting today, as the Fed could decide to raise interest rates for the first time in nearly a decade. Questions have arisen regarding the effect a potential hike would have on PE deal flow, and with that in mind, we decided to take a quick look back at debt and equity levels in PE deals from our most recent Deal Terms Report.
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Median debt levels dropped consistently from 2Q 2014 through 1Q 2015, a potential indication of the continued caution leading up to today's decision. Looking forward, the extent that a rate hike will affect dealmaking is up for debate—depending on the size of the increase. PE firms have had no substantial issues raising capital, however, so attractive deals should continue to get done, regardless of how a potential rate hike may affect the cost of debt.