To mark the forty-year anniversary of the Business Law Section’s Mergers & Acquisitions Committee, Samantha Horn and Bianca Levin-Soler, cochairs of the Committee’s Private Equity M&A Subcommittee, reflect on developments in private equity M&A in the last forty years.
Over the last forty years, private equity has evolved from an upstart “corporate raider” model into a dominant force in global capital markets, with global assets under management growing to over $9 trillion as of 2025. This growth has been driven by a shift from pure financial engineering to operational value creation, fueled by structural macroeconomic, regulatory, and market trends. Certain practice changes and legal developments have contributed to the incredible growth in private equity M&A activity.
Affordable Credit
On a macroeconomic level, the cost and availability of debt financing have significantly influenced private equity dealmaking levels. Interest rates remained consistently low from 2009 to 2022, making debt significantly less expensive. Consequently, the use of borrowed money was a key driver of acquisitions by private equity firms. Through the use of debt financing, a fund could carry out many more M&A transactions while committing significantly less of its own capital to each deal by leveraging the remainder with debt, often in the range of five to six times EBITDA (earnings before interest, taxes, depreciation, and amortization).
In addition to the low cost of borrowing, the proliferation of a wider range of debt providers, including not only traditional banks but also nontraditional private capital debt investors, has allowed for larger, more diversified, and more sophisticated leveraged buyouts.
Decrease in Public Company Listings
Due to volatility in the public markets and the availability of capital in the private equity ecosystem, the number of public companies has approximately halved over the past twenty years as the market increasingly turns to private equity firms and pension funds to provide an exit or a path to liquidity. In the past, a strategic M&A transaction or an initial public offering were the most common exit options. With a more robust and diversified private equity market, many companies choose not to go public in order to avoid the significant expense and scrutiny of being publicly listed.
In addition, we now see longer hold periods for investments (hold periods are on average over six or even seven years at present); and in transactions held by pension funds, hold periods can sometimes be significantly longer, sometimes reaching ten years or more.
Expansion in Private Equity Investment
The amount of capital dedicated to private equity has steadily increased over the last four decades as a result of a significant positive return history, a growing number of private companies in which to invest (as discussed above), and the proliferation of various additional players in the private equity ecosystem—including sovereign wealth funds, endowments, high-net-worth individuals, and family offices. In addition, the more traditional private equity investors such as pension funds have steadily increased their allocation to the private equity asset class. Certain private equity funds also went public, allowing an even more diversified group of investors to enter the private equity market.
Representation and Warranty Insurance Products
The introduction of representation and warranty insurance (“RWI”) products in the 2000s also provided an advantage to both buyers and sellers of companies in an already frothy sell-side market by allowing sellers to reduce or eliminate exposure for post-closing indemnity claims and escrowed funds. This was of particular importance to private equity sellers, who prefer to be able to distribute all funds from a sale immediately after closing to their limited partners, and was particularly important in late-stage funds that may otherwise have had long escrow periods due to the fact that a fund’s assets were minimal at the end of the fund’s life.
In addition, RWI allowed for the preservation of relationships with the sellers, who are often involved in managing the business after closing, by removing or limiting the potential for indemnity claims against them and moving the liability for those claims to an insurance company. This often has the added effect of making negotiations of representations and warranties and indemnities less contentious.
Conclusion
The incredible growth in the private equity M&A space has many contributors and sources, but some of the most influential include the availability of affordable credit on beneficial terms, the increase in allocation to this asset class, the expansion of the group of investors investing in this asset class, and the introduction and widespread adoption of RWI.
