The Private Equity Business Model: On terra firma or shifting sands?

Colin Haslam, Tord Andersson

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)


This paper reveals how the financial crisis undermined the performance of Private Equity Partnerships (PEPs). The private equity business model depends upon leveraged finance coupled with corporate transformation from market arbitrage that, in turn, delivers inflated market valuations and exit multiples. Private equity partnerships conjoin corporate productive and financial activity with speculative capital market demands where liquidity, risk appetite and market value appreciation matter. It is a business model where productive
transformation of acquired firm’s is often disappointing because leverage inflates balance sheet capitalization ahead of cash earnings capacity. It is also a volatile business model because capital market valuations and fair value reporting amplify holding gains and losses for limited equity partners. It is a business model constructed on shifting sands not terra firma.
Original languageEnglish
Pages (from-to)27-37
Number of pages11
JournalAccounting Forum
Issue number1
Early online date4 Feb 2012
Publication statusPublished - 12 Feb 2012


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