Drivers of the private equity market: evidence from the UK

There is limited research about the drivers of private equity activity, even with the significant growth in buyout volume as well as buyout value over the last 30 years. This paper examines the impact of the potential driversthat have been shown to influence buyout activity,the aggregate risk premium and creditmarket factors, using a panel of UK buyouts. First, the aggregate risk premium is negatively correlated to buyout activity, and includingthe credit market measuresdoes not changeit. Second,favorable credit market conditions do not necessarilylead to increased buyout activity in this research. Third,a closer look on the research period shows the impact of the factors have changed over the years.However, the risk premium retains its negative impact on buyout activity. This research highlightsand confirms the important role of the risk premium for decisions in corporate financein the UK.