Are private equity firms desirable?

In contemporary capitalism we can determine a striking contradiction. On the one hand our economy is dominated by giant multinationals, on the other hand we can distinguish small, activist shareholders that focus on big profits. Private equity firms are such profit-minded shareholders. But according to critics those profits aren't durable. They argue that those profits are the result of loading companies up with debts. The social utility and the economic desirableness of private equity firms depends in that way on whether better management and the increase of efficiency overshadows the "debt effect". But this isn't something new. Since the beginning capitalism is characterized by the struggle between personal greed and a collective effort in raising living standards.

Source: The private equity boom by Robert J. Samuelson
http://www.washingtonpost.com/wp-dyn/content/article/2007/03/14/AR2007031402177.html
　
The private equity boom: why now?

In the study of why the private equity boom has taken place on that moment, we have to notice that markets behave in a rational way to the price an regulatory signals they are given. A first important reason is that equity financing was very expensive because of the tech bust in the beginning of the decennium. An other reason can be find in the fact that on the moment of the boom, the corporate balance sheets and profits were very strong. Through here those companies were very attractive in the search for cash yield. We can conclude that on that particular moment everything seems to be perfect to create a boom in the private equity business.

Source: The private equity boom: causes and policy issues by A Blundell-Wignall -www.oecd.org/dataoecd/36/59/40973739.pdf

The private equity boom: were did they get there money from?

Big deals are announced regularly. Billions and billions are involved in buyouts all over the world. But where's that money coming from. Even the richest persons in the world couldn't get that amount of money together. We find the answer by the biggest and most powerful pension funds in the world. They are funding the boom in private equity. But why are pension funds interested in the private equity business? The answer is simple: the private equity returns are beating the returns in the public market, another reason why big private equity funds and big pension funds are drawn together is the dynamics of the industry. Because of the success more and more pension funds steps up their private-equity activity. This causes a snowball effect which can explain the private equity boom.
　
Source: The money behind the private equity boom by Steve Rosenbush
http://www.businessweek.com/print/investor/content/nov2006/pi20061107_031256.htm