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Assignment - Please summarize the article from word document titled "Putting the Equity Back Into Private Equity." Just one page should be fine and reference the article in APA.

Article - Putting the Equity Back Into Private Equity By Matt Wirz.

Private-equity firms are spending more of their own cash to win deals as soaring purchase prices push debt markets to the limit

Created with Highcharts 6.0.4Equity ChecksPrivate-equity firms are putting more of their own cash into buyouts.Average equity contribution in U.S. buyoutsSource: Covenant Review

Rising stock valuations are forcing private-equity firms to contribute more cash to their leveraged buyouts. That is likely to drag down performance in the long term even as pensions and other investors increasingly turn to private equity to boost returns.

Private-equity firms contributed 52% to the purchase prices of companies they bought in the second quarter of the year, according to data from research firm Covenant Review, a unit of Fitch Solutions, up from 45% in the first quarter. That compares to an average of 47% and marks the highest quarterly figure since Covenant Review began tracking the data in January 2017.

"It's because of the high stock prices today," said Covenant Review's CEO, Steve Miller. Private-equity buyers need to put up more cash to win the deals they want because "lenders are only willing to go so far," he said.

Private-equity funds buy companies with a combination of cash they raise from outside investors and money they get their acquisition targets to borrow by issuing so-called leverage loans and junk bonds. The more borrowed money, or leverage, goes into a deal, the higher the average return on the cash. But the sticker prices of recent deals are exceeding debt-market capacity.

Lenders don't typically provide debt to target companies in excess of six times earnings before interest, taxes, depreciation and amortization, or Ebitda, and almost 40% of U.S. leveraged buyouts last year raised debt that was seven times Ebitda, according to research by consulting firm Bain & Co. With debt markets already pushing their upper limit, buyout firms have to put in more of their own cash to hit currently elevated asking prices.

Leonard Green & Partners and Ares Management Corp. , for example, announced in June their purchase of health-care company Press Ganey Associates. The deal involves $1.7 billion of debt-roughly 7.5 times Ebitda-and $2.6 billion of equity, which represents 60% of the total purchase price, according to data from Covenant Review affiliate LevFin Insights.

That will likely translate to lower average returns in the next five years or so for private-equity firms as they sell off the companies they buy under current conditions.

Private-equity funds raised from 2011 to 2015 delivered median returns of 16%-21%, according to data provider Preqin Ltd. but about 30% of the investors the data firm polled in 2018 said they expect their private-equity portfolios to perform worse in 2019 than in 2018. That compares to 20% polled in 2017 who said they expected performance to deteriorate.

"Pension funds are turning more to private equity to boost their returns but there's a real question about whether that thesis holds," Mr. Miller said.

U.S. government bond yields fell Monday with the yield on the benchmark 10-year Treasury note settling at 2.092% from 2.106% Friday amid reports that Chinese growth slowed in the second quarter. Yields fall as bond prices rise.

The WSJ Dollar Index, which measures the U.S. currency against 16 others, rose less than 0.1% to 89.97.

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