NEW YORK (CNNMoney.com) -- Favorable debt markets made 2006 a golden year for buyouts, but private equity firms should have an eye trained on what happens when liquidity dries up, industry experts said Tuesday.
While the good times for buyout firms are largely expected to keep rolling this year, they won't last forever, participants attending the Private Equity Analyst Outlook Conference in New York said.
Private equity firms need to look beyond leveraging a company and focus on how they're adding and creating value otherwise they'll be caught off guard when debt markets dry up, said Jeffrey Walker, chairman and CEO of CCMP Capital Advisors, a private equity firm formed by the former buyout professionals of J.P. Morgan Partners.
Aided by one of the most favorable debt environments in years, private equity firms raised some $215 billion last year, up from $161 billion in 2005. With so much cash on hand, firms went on a buying spree, scooping up one target after another.
The robust activity level has raised wariness among some investors. Sheryl Schwartz, managing director of alternative investments for TIAA-CREF, said she limits her commitments to large buyouts to 30 percent because of the higher multiples being paid and the ever larger debt levels seen in transactions.
While higher valuations and increased competition face private equity firms this year, enthusiasm for buyouts should keep the deals flowing, conference participants agreed.
It's a mega world for private equity - as long as the debt markets remain favorable, they said.
After the buyout boom: The bust? 
